3 Financial Realities That Could Impact Your Decision to Work in Retirement

With retirements now lasting 30+ years, it’s increasingly important to factor health care and long-term care expenses into your financial analysis of whether or not to pursue a second-act career. But when making your projections, how much should you budget for these big-ticket items?

Obviously there is no one-size-fits-all answer to that question – each of you needs to guesstimate based on the particulars of your situation. Nonetheless, as a point of reference, I thought it might be helpful to share what the latest data says about national averages in three key areas of financial concern for retirees – healthcare, long term care and ongoing child/elder care costs.

Before I do though, let me emphasize that my goal in posting this information is not to depress you (although admittedly the numbers are pretty scary). Rather, I simply want to provide additional data points which you can use to better assess and evaluate your second act choices. So with that caveat out of the way, here goes:

1. Health Care Costs: A 65-year-old couple can expect to pay $220,000 on health care in retirement, finds the National Association of Government Defined Contribution Administrators Inc. On top of that, health care spending is projected to grow 5.8% each year through 2022.
2. Long-term Care Expenses: The projected costs of long-term care expenses are sobering. According to MetLife Mature Market Institute: home health care currently averages $98,280 a year; adult day care averages $81,900; assisted living costs $191,700; a nursing home semi-private room costs $202,575; and a nursing home private room comes in at $226,300.
3. Child or Eldercare Support Costs: According to TD Ameritrade’s 2015 Financial Support survey one in five Americans (22%) support an aging parent and/or an adult child, with these “financial supporters” spending an average of $12,000 a year to help their family.

Finally, I couldn’t end this post without reminding you that there are lots of wonderful reasons to pursue a second act that have nothing to do with financial need. So to wrap things up on a positive note, here are the top reasons why retirees opt to work (note 5 out of 7 have nothing to do with income):

1. To stay mentally active: 62%
2. To stay physically active: 46%
3. Social connections: 42%
4. Sense of identity/self-worth: 36%
5. Money: 31%
6. New challenges: 30%
7. Health insurance benefits: 11%

(Data from the 2014 Merrill Lynch Retirement Survey)