Chronic Illness Impacting Retirement Savings

Could A Chronic Illness Deplete Your Retirement Savings?

The unexpected cost of a chronic illness that requires long term care in retirement can be devastating financially to retirees as their retirement savings and income at risk. As we continue to live longer, the odds increase that you will need long term care assistance, even if only for a short while.

For example, if you require nursing home care, the average stay in a nursing home is 835 days (or over 2 years!). The average nursing home cost per year is $92,000. Unfortunately, this is usually not covered by Medicare. Thus, you are responsible for paying the bill! It is shocking to many people in retirement to learn that Medicare usually does not pay a significant amount of long term care costs. For retirees, this results in pulling additional money from retirement accounts to cover the unexpected costs associated with long term care.

There are other “Hidden” long term care costs

Spouses and children provide most of the long term care activities in the home. As a result, these family members often put their health, families and careers in jeopardy. Likewise, when an aging spouse is a caregiver, it can take a toll on their mental and physical health. As a result, retirement plans have to factor in the cost of long term care absorbed by family caregivers. Not addressing this in a retirement plan is mistake. Financial strategies exists that can help mitigate the cost of long term care whether in facility or at home.

Long term care costs in retirement can be devastating financially and emotionally. The impact makes no distinction between care received in the home or in a facility. When preparing a retirement income plan, it is prudent to look at the average costs, stays, etc. to get an idea of the magnitude of the issue. Keep in mind, most people overestimate their health and their ability to absorb long term care costs . As a consequence, they do not plan appropriately and put their retirements at risk.

Is An Annuity Right For You?

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Imagine you are age 75, married, and well into enjoying your retirement. Additionally, you have saved $500,000 and have been steadily taking withdrawals to live on. As a result, you and your spouse feel pretty good about things.

Unfortunately, you just found out you have early stage dementia. In 2018, the Alzheimer’s Association estimates the lifetime cost of Alzheimer and dementia care to be $341,840. Will your wife be able to live the rest of her life on the remaining retirement assets? What happens if she becomes ill later in retirement and incurs unexpected long term care costs?

Use A Fixed Index Annuity To Protect Your Retirement Savings

There are different approaches people take when deciding how to prepare for the unexpected costs of having a chronic illness in retirement.

  • Purchase a Fixed Index Annuity with “Accelerated Benefits”
    • This feature is designed to help pay costs associated with chronic or terminal illness.
    • A Fixed Index Annuity with “Accelerated Benefits” is a great strategy for retirees who want to have a way to mitigate unexpected long term care costs. With a Fixed Index Annuity, you can receive guaranteed retirement income for life and have the protection of “Accelerated Benefits” in case you develop a chronic or terminal illness..
    • A fixed Index Annuity is really the best of both worlds!
  • Purchase a Life Insurance policy with “Accelerated Benefits”
    • The use of “Accelerated Benefits” contained in life insurance policies is also a popular pro-active strategy.
    • This is not your Grandfather’s life insurance policy. The life insurance industry has changed over the past few years. As a result, the industry offers ever increasing value added products. For example, the “Accelerated Benefits” feature provides the use of your death benefit, while you are living, to help with chronic or terminal illness expenses.
    • Additionally, if you remain healthy and don’t need the “Accelerated Benefits” you retain a valuable life insurance death benefit for spousal protection, estate planning and possibly retirement income utilization
  • Purchase a long term care insurance policy
  • Self Fund

Properly Planning For Unexpected Long Term Care Costs At Retirement Keeps More Money In YOUR Pocket!


Sarah who is 65, was diagnosed six months ago with a chronic illness and would require extensive treatments and home therapy. Sarah has medicare and also carries a supplemental plan. After several months, Sarah discovered that her co-pays and deductibles were piling up. In addition, she needed help at home with several daily living activities (i.e. bathing) and would need to pay for a home health aid on a daily basis.

Fortunately, Sarah has a $500,000 Fixed Index Annuity that offers Accelerated Benefits. Sarah contacted her agent and completed the appropriate paperwork to claim benefits. Following this, Sarah was able to accelerate a portion of her death benefit to help with her Long term care costs.

Chronic Illness impacts retirement savings Raleigh & Wake Forest

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