Continuing on from last week’s post, have you counted on these often-forgotten or misunderstood expenses?
Last week we covered certain assumptions about retirement expenses that are often not true. Mortgages may still be a factor in retirement and expenses may bounce up and down each year. In addition to these “misses”, the accuracy of your retirement plan could suffer from common but preventable mistakes.
For example, it is wise to consider that you may not be the only household you financially support. A 2013 study done by Merrill Lynch found that 60% of people over age 50 are providing financial support to other family members. If your parents or children needed help, how confident are you in your ability to help out as much as you would like?
Also, it is a common mistake to assume that Medicare pays for everything. Even with Medicare coverage, according to AARP and Fidelity the average 65-year-old couple retiring this year will need $240,000 to cover future medical costs. Medicare helps out a lot, but copays, deductibles, Medicare Supplement policies, and expenses Medicare simply does not cover (like dental and long-term care expenses after about 3 months) need to be factored into your plans!
So how can you improve your retirement plan to properly take these things into consideration?
- Have financial conversations with family. For most people, this is about as fun as dental work, but given its potential impact to your future, it is worth the possible discomfort. Are any of them at risk of needing help in the future, and if so, how much?
- Look into long-term care insurance. Depending on your age, gender, and health, it may seem like this type of insurance policy is expensive and may not pay off. However, the expenses it covers can be a lot more than the premiums! Also, remember you can reduce the policy cost in many ways, including limiting the length of time or daily amount it covers.
- Learn more about Medicare or work with someone who better understands it. If you love learning the nuances of government plans, go for it. If you prefer to spend your time in other ways, make sure that your adviser understands this critical component of your financial future and is properly accounting for the potential expenses you could face.
If you are not confident in your ability to figure this out, or would like a second opinion on what you have done so far, I’m a phone call or email away!