Saving for Retirement? Make Sure You Save for Long-Term Care.

Published on July 15, 2024

If you’ve been saving diligently for a comfortable retirement, our hats are off to you! You can look forward to traveling, new hobbies, all those books you want to read, volunteering your time, and other ways you envision the perfect retirement.

One item you might not be considering is potential healthcare needs; are those factored into your retirement budget? Specifically, the costs of long-term care?

While medical insurance (Medicare plans, supplemental health plans) and funds from your health savings account cover many healthcare costs, the Nationwide Retirement Institute’s Long-Term Care Survey suggest concern among many U.S. adults about how they will handle the high costs of long-term care, should they need it.

Types of long-term care expenses

The National Institute on Aging outlines several long-term care models comprising home-based care by informal caregivers (family and friends) or by paid caregivers (nurses, home health aides, therapists, other professionals); and community and residential care such as adult day care and senior centers, assisted living residences, and nursing homes. Aside from personal care support that aging adults may require, there could be expenses associated with medical equipment, medication assistance, meal programs, housekeeping, and of course, the cost of living in an assisted living or nursing home environment.

Concerns regarding caregiving costs

With many older Americans experiencing the conflict of trying to manage their retirement goals while juggling the responsibilities of caring for elderly relatives, it’s no wonder the survey revealed that 40% of U.S. adults are worried that long-term care costs (not necessarily their own) may keep them from retiring. Some statistics from the survey point to concerns about caregiving expenses:

• Forty-three percent are concerned that those costs will prevent them from retiring.
• Fifty-six percent are willing to take a loan from their retirement account to pay for a relative’s caregiving expenses.
• Forty-two percent reported they’ll probably have to use funds they’d earmarked for their children if they ever have to take on caregiving duties.
• Average monthly out-of-pocket expenses are $338 to pay for co-pays, medications, and transportation.

Additionally, only 17% of respondents had discussed long-term care planning with a financial professional and just 20% had purchased long-term care insurance (with many unclear or making wrong assumptions about the actual vs. presumed cost of those premiums). You can read the full survey results here.

Bear in mind that Medicare does not cover assisted living or nursing home expenses, and depending on your insurance plan, you may or may not have any coverage for paid care in the home. Estimates of how much a person needs in retirement to cover “ordinary” medical expenses are in the $150-160,000 range so health care—especially long-term care—is a critical budget line item!

Enhance your long-term care coverage—boost retirement savings with a self-directed IRA

You’re already saving for retirement; why not turbocharge your account and prepare for long-term care costs through self-direction?

If you are comfortable making your own investment decisions, doing the research and due diligence about investments, and already know and understand alternative assets, you can include these in your self-directed IRA. You’ll build a more diverse portfolio and a hedge against market volatility with non-publicly traded alternative assets that are not correlated with stock market performance.

Real estate, precious metals, private equity, commodities, unsecured and secured loans, and more are all alternative assets that are allowed within self-directed plans. In fact, if you’re already investing in these outside of your existing retirement plan, you’re already a step ahead!

TIP: You can also self-direct an HSA and after you enroll in Medicare, you can use the funds in the health savings account for non-medical expenses (although you be taxed on those distributions).

Give long-term care a run for its money

Open and fund a self-directed IRA and/or HSA today. At Next Generation, we make it easy, with starter kits that walk you through all the steps, and a helpful team of professionals available by phone at 888.857.8058 or email at NewAccounts@NextGenerationTrust.com. We also encourage you to schedule a complimentary educational session to learn more about self-direction as a retirement wealth-building strategy.