Living with a chronic illness can introduce a world of challenges, from physical symptoms to the expense that comes with paying for medical care to manage your condition. It's especially important to consider your chronic medical conditions when planning for retirement.
The CDC reports that an estimated 129 million people in the U.S. live with chronic illness. And the National Institutes of Health finds that 85% of Americans over 65 years old have at least one chronic health condition, while 60% have at least two.
Having a chronic illness could impact many aspects of your retirement — including your finances and the cost of healthcare as you age. So it’s important to consider your health when making key retirement decisions.
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Chronic illness and your Social Security benefits
Claiming Social Security is a key retirement decision all older Americans need to make. But the decision gets trickier when there's a chronic illness to think about.
The general rule of thumb with Social Security is that you'll break even whether you take benefits early, late, or on time as long as you live an average lifespan. But if your health condition is likely to shorten your lifespan, that's something to consider. And it could conceivably make the case for an early Social Security claim.
But Adam Rex, CFP, AIF, and Vice President of Risk Management at Cornerstone Financial Services, cautions that people with chronic illness shouldn't necessarily rush to claim Social Security early.
"A chronic illness can affect your quality of life and expenses, but not necessarily your lifespan," he says. "Waiting until full retirement age, or even age 70, can mean significantly more monthly income down the line — income that’s guaranteed and can really help when other resources start running low."
Rex says Social Security has the potential to be a lifeline for retirees with chronic illnesses, especially since Medicare doesn't cover long-term care.
"We put extra emphasis on making Social Security work as hard as possible," says Rex. "That might mean using other retirement assets earlier on so the client can delay claiming benefits and lock in a higher monthly amount for life. In the later years, when costs tend to go up, that higher income can really make a difference."
Chronic illness and Medicare coverage
Medicare enrollees need to choose their coverage carefully. One of the biggest decisions involves deciding whether to stick with traditional (original) Medicare or sign up for a Medicare Advantage (MA) plan.
When managing a chronic illness, the decision could really go either way, says Nicole E. Asher, CFP®, CPWA®, ChFC, senior vice president, senior wealth management adviser at Greenleaf Trust.
"Medicare offers specific programs and plans designed to support individuals with ongoing health conditions," Asher explains. One option is Chronic Care Management, which provides added support for enrollees who are managing multiple chronic conditions. The conditions that may qualify are broad, including cancer, fibromyalgia and bipolar disorder, to name just a few.
That said, several Medicare Advantage plans offer Special Needs Plans tailored to individuals with chronic conditions. These plans offer disease management programs and access to specialists within different provider networks. The definition of "chronic disease" may be more limited in an MA plan than in traditional Medicare.
Asher says it's important to compare your plan choices and costs, either alone or with the help of a Medicare benefits counselor. You may find that sticking to traditional Medicare plus a Medigap plan gives you access to more providers with fewer restrictions. But with the right Medicare Advantage plan, you may find that you're able to manage your condition effectively without too much expense or hassle.
Chronic illness and managing your savings
Retirees are advised to withdraw from their savings carefully to ensure that their money lasts as long as it needs to. When you're managing a chronic illness, you may be torn between a desire to spend your money early on in retirement while your health still allows you to do the things you've always wanted versus reserve funds for later-in-life care.
Rex cautions that people with chronic illness could see their medical expenses rise over time, so retirement plan withdrawal rates have to be determined carefully. You may also need to be prepared to build in some flexibility and adjust your withdrawal rate based on what your healthcare costs look like from year to year.
Asher, too, says that if you're living with chronic illness, it's important to think about how your condition could impact your future expenses. Specifically, she advises, think about whether your illness will require ongoing treatments or specialized equipment down the line.
You may also reach a point where you require home modifications due to your condition, or a home health aide to manage daily activities. These are expenses to build into your budget and withdrawal strategy to help ensure that there’s enough money to pay for the things you need.
“While the idea of living for the moment and enjoying your savings while you can is understandable, especially if you’re facing health challenges, it’s equally important to plan for a full, potentially long life,” Asher insists.
Chronic illness: the definition matters
If you're new to the world of chronic illness, here's a quick primer on how different conditions are defined. Each type involves a different kind of medical benefit.
"Chronic illness" is a catch-all phrase referring to a disease, syndrome or disorder that lasts at least a year and has no cure, but may be managed. We use the term "chronic illness" here to mean a host of conditions that affect your ability to function, but may or may not leave you disabled. You may not even have the benefit of a diagnosis, but feel limited by illness. So, chronic illness is your perception of disease rather than a medical term.
"Chronic disease" is often used interchangeably with "chronic illness," but the term may have a more exact meaning depending on the institution using it, such as Medicare. Most specify that the patient must have a specific diagnosis, be ill for at least a year and require ongoing care or treatment. A chronic disease may or may not lead to disability.
"Disability" is distinct from a chronic illness or disease in that it leaves you unable to work; it is more precise and carries legal weight. One must apply for "disabled" status for additional benefits. Social Security defines disability as "the inability to engage in any substantial gainful activity (SGA)" due to a diagnosable physical or mental impairment that lasts at least 12 months or that will likely cause death. Meeting that threshold means you can apply for Social Security Disability Insurance (SSDI), even if you already take Social Security retirement benefits.
When you have a chronic illness but don't qualify for disability, you'll need to approach your finances and retirement spending with extra care. And you should document your treatments, diagnoses, medical tests and procedures. If your condition worsens and you want to apply for disability, you will have information to back up your claim.
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