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Can an Entire Generation Skip Retirement Planning?

MP900390083 (1)Planning a funeral seems to be more appealing than for the hard truths about aging, which include illness, discomfort and often a loss of dignity.

Always going their own way, boomers seem to have decided it’s okay to plan a funeral but not plan for failing health during retirement, reports MarketWatch in a recent article, “Baby boomers are more prepared for death than they are for their own lives.”

A study from the Bankers Life Center for a Secure Retirement revealed that eight in 10 middle-income boomers have done something about their death, either preparing a will or making their funeral preferences known to children. However, few seem to be motivated for dealing with the hard realities of aging. Only a third have made any plans about receiving care, if their health fails. Just under a third have less than $1,000 saved for emergencies, like a healthcare issue, and only 20% have savings dedicated for long-term care.

And many—40%—aren’t even concerned about care during retirement , saying it’s a low priority, or not a priority at all.

The reality is that failing health is likely to affect most of us, often to a point that we’ll need to get a caregiver or even go into a nursing home. According to the Family Caregiver Alliance, 69% of people 65 and older will have disabilities before they die, and 35% will enter a nursing home. Therefore, why are boomers so resistant to planning for the care they might need in life? Perhaps it’s a topic that makes people uncomfortable and because they don’t know where to start.

Of those who don’t have a retirement care plan, 32% responded that they needed advice but didn’t know who to trust, and 21% said that planning was too complicated. Others said it was too hard to talk about (20%), while 16% reported that they believe a plan isn’t needed.

Many people are also unaware of the fundamental facts about Medicare and paying for retirement care. About 56% mistakenly think they’ll use Medicare to pay for care, even though it typically doesn’t pay for long-term care, like a nursing home. If you factor in their lack of preparation, 81% of boomers underestimate the cost of nursing home care. However, whatever the reasons, it’s vital to plan for caregiving, so that our wishes can be honored, and we can afford to pay for the care we’d like. Let’s look at how to do this.

Draft an advance directive, which details your medical wishes, if you become unable to voice those wishes for yourself. You can also name someone else to make the decisions on your behalf, if you’re unable to do so.

Think about how you’d afford long-term care, if required. Long-term care insurance may cover the nursing home, assisted living or in-home-care costs that Medicare won’t, but it can be costly. It also has limitations, like possible specifications that may require you to be in a very high-level assisted living or nursing home, before the policy starts.

It would be wise to set money aside specifically for the cost of medical care in general. Studies show that the average retired couple should expect to spend about $280,000 for medical costs in retirement, and that does not include the cost of long-term care.

One option is to put money into an HSA, if you are still working. You can contribute with pretax dollars, which can grow and be withdrawn tax-free for federal tax purposes, if used for qualified medical expenses.

While we can never know what illness or injury will occur, staying as healthy as you can is a valuable and often overlooked strategy for a successful retirement.

Reference: MarketWatch (March 15, 2019) “Baby boomers are more prepared for death than they are for their own lives”