Before you decide to finally call an end to your days as part of the work force and start taking up hobbies like collecting seashells, playing Bingo at the local Catholic Church, or sitting out on the porch and yelling at the neighbor kids to get the heck off your lawn, there are three potential scenarios you want to be prepared for, because if one of these catches you with your proverbial pants around your ankles, what happens next will be very unpleasant.
Fiscally speaking, that is.
Look, nobody can predict life. You ever hear that old saying, “Man makes plans and God laughs?” What that means is, there are lots of things that could happen during your days, months, and years here on earth that you have no control over. The best you can do is try and prepare for any possibilities that could end up coming your way.
One of those unpredictable scenarios that could, for lack of a better phrase, dump a truckload of fecal matter on your retirement plans is if you or your spouse should come down with a serious illness.
According to The Motley Fool:
Despite what many people believe, Medicare does not cover all healthcare costs for seniors. In fact, the Employee Benefit Research Institute found a senior couple with high prescription drug needs would require $413,000 in savings to have a 90% chance of covering all their care costs in retirement.
If you develop a major illness — especially a chronic one that requires a lot of medications to manage — you could need to pay tens of thousands of dollars a year out of pocket beyond what Medicare covers. Since no one can predict if this will happen to them, everyone must plan for it.
If you have a qualifying high-deductible health plan and are eligible for a health savings account, investing in it can be a great way to ensure you’re able to cover medical costs. You can deduct contributions to an HSA in the year you make them, invest the money and enjoy tax-free growth, and withdraw money for qualifying medical expenses without paying taxes.
Even if you don’t have a health savings account, it’s critical that you set back some sort of savings that are specifically dedicated to covering medical expenses during your retirement years. Hope, pray, and live a healthy lifestyle so you can hopefully avoid having any issues later down the road, but if you do have them, you’ll be glad you saved some money back.
Another issue that could pop up unexpectedly like a boil on your nose before prom night is the need for long-term care. Any person who reaches the age of 65 has a 70 percent chance of needing some kind of long-term care services and support before reaching the end of life. A third of folks who are currently 65 will require that level of care for over five years. That’s going to take quite a chunk of change to pay for.
The costs of this care can be astronomical. Genworth’s Cost of Care survey shows the median costs of a private room in a nursing home are $9,733 a month. Even a semi-private room costs $8,669. And Medicare will not pay for $1 of nursing home care for those who just need help with routine tasks of living, which is why most people go into a nursing home.
Without a plan to cover long-term care costs, the only real option would be to spend everything you have and eventually qualify for Medicaid. That’s a bad plan. Instead of losing all you’ve worked for, look into long-term care insurance or work with an estate planning attorney to find a way to protect your assets in case long-term care becomes necessary.
The third scenario is honestly, as far as I’m concerned, the worst of the three. The death of a spouse. It’s inevitable that one of the folks who make up a married couple will pass away before the other. If that happens, the other individual will then lose the Social Security check that person drew for their income. In other words, the living spouse could lose half their household income.
You must plan financially for the death of a spouse in order to avoid falling into financial disaster in your later years. There’s a bunch of different ways you can accomplish this task including making sure there’s enough in your savings account to supplement payments from Social Security if it should drop to one payment a month.
“It’s crucial to plan for all three of these possibilities, as they are very real outcomes you could face as a retiree. If you’re ready for them, at least they won’t come as a financial shock,” The Fool concluded.