Personal Finance

How Do YOU Want to Spend Your Money in Retirement?

"Man sacrifices his health in order to make money. Then he sacrifices his money to recuperate his health. And then he is so anxious about the future that he does not enjoy the present; the result being that he does not live in the present or the future; he lives as if he is never going to die, and then dies having never really lived."

--James J. Lachard

You may have worked your butt off for many years, diligently saving, investing, and planning for retirement. Perhaps you've accumulated a substantial retirement account and are ready to retire. You know both your yearly spending average and your daily spending average, and you're well within your safe withdrawal rate.

Now imagine that long-awaited day has finally come, and you retire. Life is better than you ever expected. As the years pass, your net worth continues to grow, and you are feeling confident and have settled into your new lifestyle.

And then you get sick.

Health insurance covers most of the expenses, and you move on. Then something more serious happens, and costs are exploding. You need in-home care and services that are not covered by your policy. You are rapidly draining your nest egg, and the financial security that you've worked for your entire life is slipping away.

Long-term care insurance?

Many Americans who experience or anticipate serious health problems during their golden years turn to long-term health insurance, which can cover many of the expenses associated with long-term care, including in-home nursing, assisted living, and hospice care.

Unfortunately, according to U.S. News & World Report , as of 2013 a 55-year-old couple buying one common long-term care policy could expect to spend more than $5,000 a year on premiums. Those with certain pre-existing conditions are not insurable or may have a waiting period before the policy kicks in. The American Association for Long Term Health Insurance recommends that you apply for coverage earlier in your life, rather than later, in order to avoid being denied coverage -- but this can mean paying several years' worth of premiums before you need that coverage.

When you're healthy, an LTC plan seems to do nothing but slowly drain your assets. And what if you never use it? Then the money is gone, never to be recovered. Not only that, but care plans change over time, so certain things that were covered when you first bought the policy may not be covered when you actually need the insurance.

We, too, are wrestling with this issue and looking for answers to the "what ifs." This is not a fun topic, and none of us wants to imagine being dependent on LTC insurance, but the reality is that at some point we will all need intensive care.

Time for reflection

Do you really want to spend your hard-earned money on high-priced health-related expenses?It's a worrisome idea for all of us who are aging.

Fortunately, we have experienced living outside of the U.S. and have enjoyed the reduced costs of living, which include affordable and quality healthcare. Friends we made in these foreign countries in the early years of our retirement have since passed on, shedding some light on a possible care plan for our future.

Based on our experience and observation, if we someday need long-term care, our first choice would be to settle down in Chiang Mai, Thailand; Chapala, Mexico; or the Antigua/Panajachel region of Guatemala. In any of these places, you could hire a daily helper for an affordable price, and doctors still make house calls.

We see this as the best alternative to depleting our assets and living out our final years in a nursing home in the States. We would prefer to gift our money to organizations and projects of our choice -- not spend all of our hard-earned cash out of need.

Aging in place: sample numbers to consider

Recently, we spoke to Dr. Luis DePena of Panajachel, Guatemala, and he gave us some cost estimates for medicine and in-home care in this region. It was his opinion that, unless one needed dialysis, which could not be done here in Pana and is very expensive, pain medication and other various medications would cost approximately $660 per month per couple, or about $7,920 a year.

According to the Guatemalan government, the minimum wage for a resident of Guatemala who cooks, cleans, and provides daily care is about $9 a day, or $3,285 per year. Then there are house calls by doctors. At today's price of $39 per visit, one house call per week would cost you $2,028 per year.

Altogether, your in-home care might cost you about $13,200 per year in Guatemala if you don't need on-site medical personnel. Pricing in Thailand and Mexico is very similar.

Of course, you will need to cover room and board for your help -- and, most likely, for a child that they would bring along. You may also need to pay for other medical supplies like dressings and salves. So if you budget $15,000 per year for this category of health expenses, then it should give you some slack.

Opening up the options

We have written about continuous care before and have listed the prices you would pay in Mexico. A resident of Mexico can find assisted-living care for about $2,000 per month -- and that includes rent, meals, laundry, WiFi, cable TV, transport, and an on-site nurse (and sometimes even such amenities as a fitness room and a swimming pool).

Compare that to what you might be able to find in the city or state in which you currently live. According to the Genworth 2015 Cost of Care Survey , the median cost of a private room in a nursing home in the States is over $91,000 annually, while the median annual cost of a home health aide is $45,760 .

The American Association for Long-Term Care Insurance says the average stay in a nursing home is 2.6 years for women and 2.3 years for men. Based on the above figures, you are looking at hundreds of thousands of dollars for a couple to spend their last few years in a nursing home, along with a considerable amount of money for in-home care beforehand.

Do you have enough savings allotted for this future expense?

Broaden your horizons

It's important to consider all your options and decide what's best for you . We realize not everyone is inclined to move overseas. Then again, not everyone wants to spend the amount of money required for long-term care in the U.S. And some don't have family to rely on as they age.

Even though this is a difficult subject to broach, knowing you have affordable alternatives can bring you peace of mind.

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About the authors

Billy and Akaisha Kaderli are recognized retirement experts and internationally published authors on topics of finance and world travel. With the wealth of information they share on their popular, they have been helping people achieve their own retirement dreams since 1991. They wrote the popular booksThe Adventurer's Guide to Early RetirementandYour Retirement Dream IS Possible.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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