5
RETIREMENT
Retirement
Shocks That Can
Break Your Bank
Tips for making sure your money lasts as long as you do BY TRACI NEAL
Y
Photo: iStock.com/franny-anne.
ou know what they say about “the best-laid plans,” right? Well, that goes double in retirement. Often, despite sensible, careful preparation, the plan for a financially secure retirement can go awry. All it takes is one major retirement “shock” or unexpected expense, says Anna Rappaport, chair of the Society of Actuaries Committee on Post-Retirement Needs and Risks and the organization’s past president. The committee, says Rappaport, has been working for 20 years to identify and understand the way Americans manage their finances after retirement. “When we first looked at this, we did some work to understand how people were planning for retirement. We did focus groups and figured out that most people were preparing for things like monthly bills but not for major expenses,” says Rappaport. “A lot of people hadn’t set aside money for these major unexpected expenses or catastrophes or what we called ‘shocks.’” Here are some potential expenses that can undermine the best-laid retirement plans.
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LONG-TERM CARE One of the most obvious issues that can derail retirement finances is the need for long-term care, says Kathleen Godfrey, president of Godfrey Financial Associates in Glenmont. “Medicare pays for a lot but they don’t pay for things like dementia care,” says Godfrey. “If you needed a home aide, for instance, that’s a huge expense and that can bankrupt retirees.” According to New York’s Department of Financial Services, nursing home costs upstate range from $264 to $308 a day—or about $96,360 to $112,420 a year. Downstate, they’re even higher, from $124,100 to $142,350 a year. Home health care is also expensive, averaging about $20 an
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hour, according to an industry survey, the department says. “Some people are financially prepared for a long-term care event, but a lot are not,” says Rappaport. “Families often help out, but the individual who may need help has not planned together with their families, so people reach the stage that they need help and the family suddenly is in a mess because they’re trying to help a parent who hasn’t planned.” For couples dealing with a spouse in need of long-term care, “it can lead to financial ruin,” Rappaport says. Godfrey agrees that although long-term care insurance is pricey, it may be worth the expense if paid during working years. “My father had Alzheimer’s and my mother eventually could not take care of him,” says Godfrey. “He ended up having to go to a nursing home and she liquidated quite a bit of their retirement nest egg to pay for that.”
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OTHER HEALTH EMERGENCIES
People over age 65 are generally covered by Medicare, with a variety of choices and supplemental insurances that include most medical expenses, says Rappaport. But beware the surprises, she advises. “If you go to an emergency room or in for a surgery, you may think you’re in-network and the hospital is in-network, but that emergency room physician may not be in-network, the anesthesiologist may not be in-network. We hear all kinds of stories like that, anecdotes about how people think they’re staying in-network but then there’s a huge surprise bill afterward.” Congress recently enacted legislation, effective in January, aimed at protecting consumers from excessive out-of-pocket medical bills. There can still be significant hidden expenses, such as prescriptions that aren’t covered, deductibles and copays, that could upend a budget, Rappaport says. CONTINUES ON 65
