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How Social Security and Healthcare Impact Your Portfolio

Christine Benz

Christine Benz: Hi, I'm Christine Benz for Morningstar.com. One of the biggest wild cards in many retiree plans is how to manage long-term care expenses. Unfortunately, there are no perfect answers, and pure long-term care costs aren't covered by Medicare. 

Purchasing long-term care insurance seems like the safest way to go, but premiums have skyrocketed on many policies. Higher net-worth investors might choose to self-fund long-term care expenses, but how should they do that? 

One idea is to carve out a separate bucket in your retirement plan--think of it as your "I don’t know what will happen" bucket. In it, you can stash assets for long-term care expenses; I'd target a minimum of three years' worth of long-term care expenses, or roughly $300,000. If you don't end up needing the money for long-term care, you can use it to pay your living expenses if you happen to live a very long life, or pass those assets to your children or charity. Segregate these funds from the rest of your retirement assets and maintain an asset allocation that's roughly in line with your time horizon. For young retirees, the assets should be invested aggressively, whereas older retirees will want to focus on safety and liquidity for this portion of their portfolios. 

Thanks for watching. I'm Christine Benz for Morningstar.com.