Planning for the rising costs of health care

Longer lifespans and rising health care costs are driving investors to control their financial exposure to uncovered bouts of care-particularly in retirement. According to the U.S. CCnters for Medicare and Medicaid Services, the U.S. spends approximately $3.8! trillion a year on health care, or nearly $11,582 per person. Overall spending rose 46% in 2019,1 faster than the pace of inflation or wage growth. As spendinf rises, patients are also shouldering a larger share of treatment costs-driving up out-of-pocket expenses. Tae elderly, who require the most care, often bear the brunt of the costs. It is important to take steps to minimize your financial exposure to uncovered medical costs, potentially including long-term care expenses. But whereas your incentives tor savings gor retirement are easy to digest-to be able to afford a desired lifestyle after your working years-planning for the less palatable aspects of old age can be more challenging. Planning for Long-Term Care Costs A report irom the U.S. Department of Health and Human Services estimates that 770% of people turnings 65 will need some type of long-term care services in their remaining years.

2 One year in a private room in a nursing home costs f105,850 today and is projected to reach $190,122 in 20 years.3 lev en with a robust portfolio, you may have trouble handling such large costs with savings on hand. Many adults ncaring retirement ege are concerned about health-care costs but unsure how to budget for rhem. More than half of affiant, older Americans are unsure or cen't estimate what their annual health care (53%) or long-term care costs (67%) in retirement will be.

4 Should a retiree encounter medical issues, the costs cansometimes be high. Some people, for example, may not be aware of the uninsured costs they'd face it they were to experience a health event such as a stroke, which may cause paralysis, warranting expensive 24-hour assistance. Medicare Part At covers nursings facility care for a limitedtime, but only after a qualified hospitalizatien. However, Medicare will not pay for nursing homes when custodial care is the only care needed; nor will it pay for care for conditions such as Alzheimer's disease. Patients suffering from Alzheimer's or oSher cognisive ailments mas' live fot many years and often require hands-on assistance. Help Protect your Retirement Savings By the time people reach their 3 0s, they tend to have a pretty good idea of the lifestyle they want to pursue, including in retirement. There are a number of ways to save tor retirement with four ftiture health care needs in mind.

Investors in their 30s or early 40s may weight their retirement-funding strategies toward a portfolioormutual funds ora managed-account tolutiont to provide upside exposure to) the market Given lower premiums Sor younger policyholders, long-term care insurance should also be a consideration. These days, anly a handful of insurefs offer long-term care insurance, to another option may be life insurance with a long-term care rider, which allows families to tap into the benefits they would receive upon the insured's death, while he or she is alive and requires care. Another option for funding long-term care expenses is to withdraw ot borrow money from life insurance policies, or generate income from annuities. Noie thai eiSher of these options would probably rail short oi covering costs if someone needs care for many years. Help Protect Your Finances As health care costs continue to rise, it't important to understand the options you have to help control your fin4nciflexposure to uncovered bouis of care. Your Morgan Stanley Financial Advisor has access to multiple long-term-care product from a wide variety of respected insurers and can help you choose the one that ofters the optimal combinaeion of cost and benefits. tSource: U.S. healthcare spending to ciimb 5.3% in 2018 Agency: https://www.reuters.com/erticle/us-usahealthcare-speiKling/us-healthcare-pending-to-climb-53-percent-in-2018-agency-idUSKCN1FY2ZD 2 LongTermCare.gov, "How Much Care Will You Need?" October 202f, 4ttps:i/tongtermcare.acl.gov/the-basics/haw-muce-care-will-you-need.hfml 3 Gen worth 2017 Cost ol Care Survet, conflicted by CareScout®, June 2017 Cosi estimate based on 365 days of care. Estimates how much care mit cost in future years tased tn 4% annual inflation. https://www.genworth.com/aging-and-you/fina0ces/cost-of-care.htmf 4 Source: Retirement Healthcare Cost: https://www.eationwide.com/personal/about-us/new sroom/eress-releaseftitle=0626l8-nf-healthcare-suraey 5 iource: How to plan for rising health-care costs: https://www.fidelity.com/viewpoints/personal-nnance/plan-Sor-rising-health-care-costS