How to reduce health care costs while planning for retirement

well as we look ahead to retirement

planning one of the things that some

people might not consider is planning

for perhaps declining health in

retirement as well

um that is uh what we're going to talk

about today with carolyn mcclanahan she

is

with cfp life planning partners and

she's not only a financial advisor she

is also an md so she is uniquely

qualified i think to talk about this

issue um so carolyn what do you think is

the number one thing for people to

consider earlier on in their career and

keep in mind not just as they're putting

money in their 401k but how they should

be thinking about financial planning

specifically for health issues

well they first should concentrate on

what they can control and there's two

main things that people can control to

control their healthcare costs and

that's their health and their attitude

about how they utilize the healthcare

system and when you think about your

health most people have a lot of

lifestyle issues half of the population

adult population has hypertension a

large percentage of people have diabetes

and if you learn to take care of your

health early and you learn to take care

of your diseases like your hypertension

diabetes early you can do a significant

job decreasing health care costs i have

a great example of a patient that i saw

as a doctor i still practice in a free

clinic he was a construction worker and

he released on the weekend by drinking a

12 pack of beer and we couldn't control

his blood pressure and his diabetes he

was starting to get diabetes and totally

quit drinking everything went away and

now he takes no medicine and doesn't

have to go to the doctor so that's a

perfect

example carolyn if i plan to retire at

65 just given how uh inflation has taken

hold uh in this world how much money

will i need to have set aside

uh to cover my medical expenses

you know people love to try to predict

an unpredictable future we have no idea

what health care costs are going to be

in the future you know fidelity comes up

with these numbers that you have to have

a few hundred thousand per person for

health care expenses really depends on a

couple of things are you a high health

care user or a low health care user if

you're the type of person that likes to

go to the doctor all the time soon as

you get a sniffle or a hang nail or if

you like to use a lot of alternative

medicine which is expensive you need to

have a significant budget set aside for

your health care expenses i had a

patient once who was um she looked like

she was 70 and she said to me i had

never i hadn't been the doctor in

decades the woman was actually 98

and she came to see me because she

actually had this big thick toenail she

couldn't cut and so she um you know

she's a perfect example of she shouldn't

have saved much money at all for her

health care expenses so that's the first

thing you have to look at and then once

you have that money in your budget that

you know how much you spend you need to

plan for that expense just like any

other expense of retirement

you know when you're younger you can

also carolyn of course buy long-term

care coverage you can pay into an

insurance that will pay for those kinds

of issues when you're you're older

is that a good option for most people

well you know the long-term care

industry has been

up and down i've been doing this 20

years now policies you bought 20 years

ago are a great deal today but you can't

get those policies anymore so for a

younger person of course it's always

important to make sure that they have

disability coverage first and that

they're saving appropriately for health

care expenses if you can afford

long-term care insurance then you you

could buy it you know the the problem

that you have is that's a policy you're

not going to use if you buy it while

you're in your 40s or early 50s you

hopefully won't use it for another 30 40

years and who knows what it's going to

look like so that's why we

for people who want to buy products we

recommend the life insurance hybrid type

products instead of traditional

long-term care some people would argue

with me about that but the more

important thing with planning about

long-term care is you got to think about

your health if you have an unhealthy

lifestyle and you're not willing to

change it you got to plan for who you

are and not who you want to be your

chance of needing long-term care

extensively is not real high it's about

two years however if you live a very

healthy lifestyle and you have and

you're gonna live a long time you have a

higher risk of dementia so your health

your long-term care need would average

about five years so you need to take

those things into consideration when

you're thinking about buying long-term

care products

and carolyn finally just take a step

back here for the sort of baseline i

mean everybody's gonna get medicare

presumably hopefully by the time they

get yeah they get to retirement so if

people have medicare you know do most

people need more than that

oh absolutely you know medicare has

what's called unlimited cost sharing so

there's different parts to medicare you

have medicare a and b that you get

provided through the government and

that that pays 80 percent of cost and so

let's say that you have a heart attack

and the bill ends up being a hundred

thousand dollars which is not uncommon

when you have a massive you know problem

that you're hospitalized for a while and

then you you're gonna owe twenty

thousand dollars so it's important for

you to have what's called a medigap

policy and also a medicare d policy

which pays for prescription coverage and

so it adds to the cost but if you get

significantly ill that's you're going to

be glad that you have that coverage

another option is medicare advantage

which are cheaper plans but there are

limitations of those so it's important

for people to understand and learn the

medicare landscape before they retire

before they actually have to make that

decision

and i think most people probably don't

so this is really useful information

thank you so much for being here carolyn

mcclanahan of cfp life planning partners

appreciate your time this morning