Can you afford the years beyond your ‘health span?’

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We’re all interested in the topic of lifespan. What’s the average lifespan of men and women? What factors influence lifespan? What can I expect for my own lifespan? Yet, you may also want to think about your health span — that is, how long you will live in generally good health. How should you factor in your potential health span when creating your financial strategies?

To begin with, you’ll want to be aware of the gap between lifespan and health span. Consider this: The average healthy life expectancy in the U.S. is only 68.5 years, according to World Bank data cited in the 2020 Edward Jones/Age Wave Four Pillars of the New Retirement study. This means that, on average, Americans can expect to spend about 10 years in poor health, which, unfortunately, is more than in most other developed countries.

Of course, everyone’s situation is unique, and many variables are involved in the lifespan/health span comparison: differences in projected longevity between women and men, family health histories, environmental factors, and so on. And there are certainly plenty of people whose health spans essentially match their lifespans — that is, they enjoy healthy, busy lives right up until the end. Yet, even the possibility that you could face a decade or more of less-than-ideal health in your retirement years should be cause for concern. The health issue, by itself, is already worrisome, but the accompanying threat to financial independence is also on people’s minds. In fact, 72% of retirees say one of their biggest fears is becoming a burden on their families, according to the Four Pillars study.

So, given these concerns, here are a few moves to consider, possibly with the help of a financial professional:

Investigate long-term care protection. The costs of an extended nursing home stay can be exorbitant, and the services of a home health care aide are far from inexpensive, too. And retirees know it: Their greatest financial worry is paying for health care costs, including the cost of long-term care, again according to the Four Pillars study. Consequently, you may want to explore some type of long-term care protection – and the younger you are when you purchase this protection, the more affordable it tends to be.

Evaluate your investment mix. Even with Medicare and Medicare supplement plans, you will likely face significant out-of-pocket health care costs during your retirement years. To help pay these bills, you will need sufficient liquidity in your financial accounts. So, you may need to evaluate, and possibly adjust, your investment mix to make sure you’ve got adequate funds in liquid, low-risk vehicles. These types of securities won’t offer much in terms of growth potential, but they do provide more stability of principal. You won’t want to abandon all growth-oriented vehicles, though — even in retirement, you need to stay ahead of inflation.

Create a sustainable withdrawal rate. To help address your health span funding concerns, you’ll also need to ensure you’re not taking out too much money from your investment portfolio each year, especially during your first few years of retirement.

If you could see into the future, you’d know exactly where your lifespan intersected with your health span. But since this certainty is unattainable, you’ll want to be prepared for whatever comes your way.

Karsten L. Jacobson, CFP®, is a financial advisor for Edward Jones at 2208 Sawgrass Village Drive in Ponte Vedra Beach Tel: 904 285 9898. This article was written by Edward Jones for use by your local Edward Jones financial advisor.

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