The other is, try to save more. If you're saving maybe six percent of your salary, and your boss is kicking in a matching contribution, if you can eventually get that up to maybe 10 percent, that's going to make a huge difference. And also, look at the asset allocation. Maybe you're more conservative than you need to be. Maybe you're getting six percent on your whole portfolio. If you could nudge that up a bit, little more aggressive, and maybe over the long term get eight percent. The combination of those three things can more than double a 45-year-old's nest egg by the time they retire 20 years from now.
MARK CORTAZZO: And the key with that is all about, what little sacrifices are you willing to make? I'm willing to work a couple more years. I'm willing to sacrifice taking a little bit more risk. I'm willing to delay taking my social security. So, these are all, you know, little things that, cumulatively, have a significant impact.
CONSUELO MACK: So, Mark and Mary Beth, what are the biggest challenges that retirees face?
MARY BETH FRANKLIN: Well, I think right now, it's general health care costs, particularly for people who have either left their job or lost their job before age 65, when Medicare kicks in. The other risk is at the older end. Most people don't realize that nursing home care, assisted living, home care, that is not covered by Medicare. And, unless you have a chunk of money to self-insure, this is, again, a reason you might want to shift the risk to an insurance company and purchase something called long-term care insurance.
MARK CORTAZZO: I'm trying to protect the clients against a catastrophic event. Not them needing care for three months or six months. That's bad. It could be very expensive. But it's not going to ravage their savings. So, when you're looking at a long-term care policy, you can look at policies that have a much longer waiting period, maybe six months or a year before the policy kicks in. So you're self-insuring that front-end expense. But the cost for those policies are much lower, because it's really catastrophic protection. And if you had to take a hit for 60 or $80,000 for a year, I think, you know, most, or a lot of people's portfolios can absorb that. It's $80,000 a year for 10 years that would wipe them out.
MARY BETH FRANKLIN: And the most important thing, when people are looking at long-term care insurance, aside from going with a solid insurance company that's going to be there 10 or 20 years from now, is the inflation protection. Because, if you buy something with, say, a $200-a-day benefit now, without inflation protection, which can double the price of the premium- 20 years from now, when you use it, it's as if you had no insurance at all. So, the rule of thumb on buying long-term care insurance is short and fat, rather than long and skinny. You want a short, fat policy for about three years, with good protection, including inflation protection. Otherwise, don't bother. And commit to continue to pay those premiums for as long as you need them. Because, if you pay them for 10 years and then drop it because your premium went up, you just wasted 10 years of premiums.
CONSUELO MACK: So that's another thing that we have to think about, in funding our retirement as well, is the ability to actually these, you know, wonderful policies that everyone thinks that we should buy, is to actually be able to maintain them, to the point where we actually need them, right?
MARY BETH FRANKLIN: And sometimes people will buy an annuity, just for the point of having these payouts to fund their long-term care insurance. And that's one strategy, is that, you know this part is covered.
CONSUELO MACK: So, on that note, we're going to have to end this, unfortunately. But Mary Beth Franklin and Mark Cortazzo, thank you so much for joining us on Wealth Track.
MARY BETH FRANKLIN: Thank you.
MARK CORTAZZO: Thank you so much for having us.
CONSUELO MACK: We will be hearing more from Mary Beth Franklin and Mark Cortazzo next week when they return to talk about how retirees can maximize their income and guarantee a portion to cover essential expenses.
And that concludes this edition of WealthTrack. To watch this program again, please go to our website, wealthtrack.com, to see it as a podcast or streaming video. Thank you for watching and make the week ahead a profitable and a productive one.
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