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​Social Security recently announced some good news for retirees. The cost-of-living adjustment (COLA) in 2019 will be the highest in seven years. Next year’s benefit increase of 2.8 percent is significantly higher than 2018’s 2 percent raise. In fact, other than 2012, there hasn’t been an increase of more than 2 percent in the past 10 years. There weren’t any COLA increases in 2010, 2011 or 2016.1
 
The 2019 COLA is a positive development for seniors as it means that they get a much needed pay increase. The purpose of COLAs is to help retirees keep up with inflation and afford increasing prices for things like food, energy, housing and more. Social Security bases its COLAs on a broad version of the consumer price index (CPI).1

COLA Doesn’t Always Match Retiree Inflation
 
An increase in Social Security benefits is always good news. However, Social Security benefit increases usually aren’t enough to help most retirees keep pace with inflation. Consider that Social Security probably isn’t your primary form of income. Ir likely makes up just a portion of your overall cash flow. Remember, the COLA only applies to Social Security benefits; not all your income.
 
Many people also debate whether the CPI that is used by Social Security is appropriate for retirees. Social Security uses the CPI-W, or consumer price index for urban workers, to estimate COLA.1 The problem is that the CPI-W tracks costs for workers, not for seniors. Many retirees face different costs than the average worker faces. For instance, retirees may have increased health care and housing costs. The CPI-W doesn’t weight those areas heavily, so it may not be an accurate gauge for retirees.

How to Keep Pace With Inflation
 
Inflation is inevitable throughout a long retirement, and it can have a big impact on your standard of living. Even a moderate amount of inflation can cause prices to double over several decades. To maintain your lifestyle, you’ll need to do more than rely on Social Security benefit increases.
 
You may want to talk to a financial professional about strategies to increase your income over time. For example, you can use an annuity to generate a guaranteed* income stream. Often, the annuity is guaranteed* for life, regardless of market performance.
 
You also may want to look at long-term care insurance with an inflation protection rider. Long-term care can be a sizable expense, and it usually isn’t covered by Medicare. Also, costs are rising every year, often at a higher rate than inflation. An insurance policy in which the benefits are aligned with inflation could help you keep up with rising costs.

Ready to develop your retirement inflation strategy? Let’s talk about it. Contact us at Heritage Financial North today. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.
 
1https://www.ssa.gov/cola/
 
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
18149 - 2018/10/17

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​Planning to retire soon? If so, you may want to consider long-term care. Research from the U.S. Department of Health and Human Services suggests that long-term care will be a reality for many of today’s retirees. The agency estimates that today’s 65-year-olds have a 70 percent chance of needing long-term care at some point in their lives. While a third of all seniors will never need care, 20 percent will need it for more than five years.1
 
Long-term care is a broad term and it is often used to describe many different services. Generally, though, long-term care is extended assistance with basic living activities such as cleaning, bathing, eating and more. While it’s often provided in an assisted living facility, it can also be provided in your home by a health aide or even family.
 
Many people people try to opt for home care because they want to be in their home but also because they believe home care is more affordable. That’s not always the case. A Genworth study found that a room in an extended living facility and a full-time, in-home health aide both cost $4,000 per month on average in 2018.2 Considering that care is often needed for a year or more, it’s easy to see how costly long-term care can be.
 
Unfortunately, many seniors fail to plan for long-term care because they think that they won’t need it or that they can simply rely on family. Many of these assumptions are born from a misunderstanding of why long-term care is needed. Below are descriptions of some of the major health issues that can cause a long-term care need and what kind of care is often required. With a better understanding of the threat, you can implement a plan and a funding strategy.
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Causes of Long-Term Care
 
By far, the largest drivers of long-term care are cognitive issues like Alzheimer’s. Nearly 25 percent of those who need care do so because of Alzheimer’s.3 The risk of suffering Alzheimer’s is substantial. According to the Alzheimer’s Association, your risk of developing the disease doubles every five years after age 65. By age 85, almost one-third of seniors are at risk.3
 
Alzheimer’s may be the most common reason why people need long-term care, but it’s not the only reason. Nearly 35 percent of those who need care do so because they are suffering from complications related to a stroke, injury, circulation issues, or cancer. Nervous system issues and respiratory issues are also big factors.4 Even if you don’t get Alzheimer’s, you still may need care.
 
Also, keep in mind that many of these health challenges are progressive and incurable. You could live for years with Alzheimer’s, cancer, heart disease or any of the other issues. They’re likely to intensify as you get older. While you may be able to rely on family and friends in the early stages, that may not be the case as the disease progresses.

Types of Care
 
The type of care you receive also factors into the total cost. Not all care is the same. Many people believe that Medicare will cover their long-term care needs. Medicare may pay for some of the care, but that usually only happens if it involves skilled nursing and is focused on recovery and treatment.
 
Recovery usually isn’t the goal of long-term care. Very often, those who need care are beyond the point of recovery. While there may be medication involved, much of long-term care is focused on custodial assistance and lifestyle support. Long-term care aides often help with things like eating, bathing, mobility, incontinence, and basic medication needs.
 
Those activities usually don’t fall under the umbrella of skilled nursing, which means the care is unlikely to be covered by Medicare. If you don’t have a long-term care funding strategy, now may be the time to develop one. Long-term care insurance could be an effective tool to minimize your risk and limit your out-of-pocket costs.

Ready to develop your long-term care strategy? Contact us today at Heritage Financial North. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.
 
1https://longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html
2https://www.genworth.com/aging-and-you/finances/cost-of-care.html
3https://www.alz.org/alzheimers-dementia/what-is-alzheimers/risk-factors
4http://www.aaltci.org/news/long-term-care-insurance-news/top-reasons-for-long-term-care-insurance-claim-alzheimers-cancer

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
18148 - 2018/10/17