This as-told-to essay is based on a conversation with Tyler End, cofounder and CEO of Retirable. It has been edited for length and clarity.
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Death and long-term care are two things people don’t want to talk about, ever. When you add in money, it gets even more complicated.
Talking about money and aging is my job, but it still isn’t easy to discuss those things with my own mom, who is in her 70s. Still, I know these difficult conversations are worth having.
My mom is a single public school teacher who doesn’t have the type of assets that many wealth management firms require — she’s the reason I started a company focused on helping everyday people retire. My grandmother had dementia, so I also know the toll that long-term illness can take on a family.
Through my work as a financial planner, I’ve realized planning for retirement is as much about emotion as it is about math equations. We spend so much time and energy trying to accumulate wealth that it can be emotional to think about decumulation — spending money after retirement. In addition, common misunderstandings about retirement costs can lead people to miscalculate their spending.
Here’s how I approach discussions about long-term care costs, with my family and my clients.
Plan for nuances, not just the worst-case scenario
When people talk about long-term care, they tend to think about worst-case scenarios, like developing dementia and being in a nursing home for 10 years. Once you’re 65, the likelihood of you having a long-term care event is pretty high — but it might not be the type of catastrophic event many people picture.
What’s even more common is needing mid-term care, such as rehab after a hip replacement or help at home. Consider how you (or your parents) would pay for these types of shorter, more acute events by reviewing your insurance policies (including life insurance and long-term care insurance, if you have them).
Recognize you’re still going to have medical expenses
A lot of people really underestimate what their out-of-pocket medical expenses will be on Medicare. Medicare plans include premiums and copays. Some people will choose to have supplemental insurance policies as well.
One of the best things you can do for yourself or your parents is to familiarize yourself with your Medicare plan. Understand your likely costs for routine care and, if something more serious happens — like the acute medical events I mentioned above.
Understand the difference between Medicare and Medicaid
Many people don’t fully understand the differences between Medicare and Medicaid, or how each program affects their finances.
Medicare is broadly available to people 65 and older, regardless of income. However, it typically doesn’t cover long-term care. Medicaid is an income-based program that may cover long-term care, but only after your personal assets are used.
I recommend that people talk with an elder law attorney and a financial advisor in their state to better understand Medicare eligibility and their options for covering the cost of long-term care. You might choose to start planning well in advance to remove assets from your estate by gifting them or placing them in trust.
Don’t underestimate senior living spaces
For some reason, I see many people with a bias against senior living facilities. I think this really does a disservice. In terms of costs and social engagement, these are great places. Many of them start with independent living for people 55+, and have additional support available when residents need it.
When you retire, you lose a lot of social structure found at work. Having a built-in community with other retirees can improve quality of life. I encourage people to tour a 55+ community to ease their concerns about what retirement living can look like.
Acknowledge the huge unknown
Retirement planning is built around a massive unknown: how long you’ll live. We have to make a lot of educated assumptions about the length of life, healthcare costs, and also external factors like inflation and market performance. Talking through these unknowns can help you make an informed decision about when to claim Social Security.
Transition times — like when a parent retires or moves — are natural opportunities to have these conversations. Ask questions and bring curiosity about the future to the table. Then, build from there.
