Financial Tools For Post-Retirement

Updated: Jul 18, 2022

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Planning for your life post-retirement can be an overwhelming experience. Still, considering retirees are now living longer than ever, it has also become more important than ever to ensure you have the financial resources you need to leave a comfortable and happy lifestyle—particularly if you plan on aging in place. Specifically, there are a few financial tools and resources you may want to become more familiar with; they could become useful once you retire.

retirement planning

Long-term care insurance is a type of coverage that is intended to cover eligible personal and custodial care expenses that can help you remain happy and healthy in the comfort of your own home. For example, a long-term care insurance policy may cover the costs related to having a caregiver stop by your home once a day to assist you in preparing meals, maintaining your home, taking your medications, and completing other everyday tasks. These are expenses that most Medicare and Medicaid plans will not cover, so for those who wish to remain at home throughout their retirement, this is a coverage option worth exploring.

On the other hand, long term care insurance can be rather expensive and is not ideal for everybody. Purchasing this type of insurance at a younger age can help you save on your premiums, though you may also want to consider alternate options, such as rollover funds from a health savings account or pension money to help you cover these costs as needed.

Exploring Your Options

Long term care insurance is one of those things you hope you never have to use, but having it can certainly provide you with added peace of mind—especially if you want to remain living at home for as long as possible after retirement. There are many coverage options to choose from, including coverage for basic in-home care for healthy living, memory care, and full nursing home coverage. Furthermore, if you already have a life insurance policy, you might consider “hybrid” long term care coverage, which allow you to combine your life and long term care policies. The main benefit of doing this is being able to lock in your rate.

Long term care insurance is one of those things you hope you never have to use, but having it can certainly provide you with added peace of mind.

Pros And Cons

The main advantage to long term care insurance is being covered for any in-home or nursing home care you may need to live an independent and healthy lifestyle as you age. However, long term care insurance can be pricey, especially if you wait to buy until you’re older. The younger you buy the policy, the more you’ll save. Still, long term care coverage rates can fluctuate over time (unless you have a hybrid policy, which should allow you to lock your rate in).

Choosing The Right Coverage

With so many options, it can be difficult to determine which option is best for you. Generally, you should begin by determining the maximum dollar amount of coverage you see yourself needing each month. This usually ranges anywhere between a few thousand to more than $10,000 per month, depending on the level of care and how frequent the care is needed. From there, subtract the amount you can afford to pay out-of-pocket by the total monthly cost. This is the amount of monthly coverage you’ll need to buy.

If you have a spouse, you may also be able to save on your monthly premium by purchasing a joint policy. Also keep in mind that long term care insurance premiums can be tax deductible in certain circumstances.

Overall, long term care insurance is a wise investment, and the sooner you buy, the less you’ll pay. Be sure to consider this financial option as you plan for your future.

If you plan on remaining in your home after retirement, reverse mortgages are another financial resource you may wish to become familiar with. Essentially, a reverse mortgage is a line of home equity that most homeowners age 62 and older are eligible for. Rather than taking out a loan to cover certain expenses after retirement, you can draw on your home’s equity. A reverse mortgage can provide you with additional income when needed, and you’re not required to pay back the money borrowed until your home is sold or otherwise vacated.

Reverse Mortgages are a great option for seniors who need a little extra monthly income to cover medical expenses or other unforeseen financial obligations.

On the other hand, you will need to remain up-to-date on all your home’s property tax payments, insurance, and HOA dues (if applicable) in order to qualify. Other options worth considering in lieu of a reverse mortgage include home equity loans and lines of credit.

Pros & Cons

The biggest advantage to a reverse mortgage is that it allows you to borrow against your own equity while retaining ownership of your home. It’s a great option for seniors who need a little extra monthly income to cover medical expenses or other unforeseen financial obligations. In fact, there are no limitations on how you can use funds from a reverse mortgage.

On the other hand, there are some costs involved with a reverse mortgage that need to be considered. For example, loan origination fees, appraisal costs, and interest can easily total thousands of dollars, so this needs to be a determining factor when deciding whether a reverse mortgage is your best option. Furthermore, since you’ll need to pay back your reverse mortgage when you move out of the home, sell it, or pass away, a reverse mortgage may prevent you from keeping your home “in the family,” which is a deal-breaker for some.

Is A Reverse Mortgage Right For You?

Typically, a reverse mortgage is a viable option when you have a large expense to cover and do not want to go through the hassle of taking out a private loan. For instance, many will use funds from a reverse mortgage to cover medical expenses. Some choose a reverse mortgage to simply boost their monthly income. It is typically a smart choice for those who plan on remaining in their home for a long time to come. However, a reverse mortgage is generally not the best choice if you plan on moving soon, or if you can’t currently keep up with the costs associated with owning your home.

If you decide to go through with a reverse mortgage, be aware that you will be required to receive financial counseling (at no cost to you) through a third-party, such as AARP or a national counseling agency. You will also need to own your home outright (or have a low mortgage balance) in order to be eligible.

Overall, a reverse mortgage can be a great way f you have any questions about whether or not a reverse mortgage is a good choice for you, it’s in your best interest to speak with a financial advisor.

Lastly, be sure you understand your Medicare and Social Security benefits post-retirement. Typically, retirees become eligible for Medicare and Social Security at age 65, though your precise eligibility age will depend on the year you were born. You’ll also want to make sure you understand what your estimated monthly Social Security benefits are based on when you retire and how much you have paid in over the years. Keep in mind that this number can vary greatly depending on how many years you paid into Social Security and how much was withheld by your employer.

This isn’t a comprehensive list of post-retirement financial tools by any means, but it is a good place to start. By taking the time to plan for your post-retirement lifestyle now, you’ll be better able to enjoy your golden years.