Who Will Care for You? Long-Term Planning for Your Golden Years

As you enter your golden years, it’s crucial to have a plan for how you’ll pay for long-term care if you need it.

About 70% of people turning 65 today will require some form of long-term care during retirement, whether that’s at-home assistance, an assisted living facility, or a nursing home. Understanding the options available and taking steps to prepare can help ensure you receive quality care without draining your nest egg. Read on to understand the key considerations, costs, and alternatives.

Know What’s Covered

The first step is understanding what long-term care entails. Long-term care insurance and other programs typically cover care costs if you:

• Have a severe cognitive impairment or dementia.
• Can’t perform daily self-care activities like bathing, dressing, eating, etc. without hands-on help.
• Require constant supervision due to a chronic condition.

Insurance and government programs pay for non-medical custodial care, not routine medical care. So you’d use your health insurance for doctor visits, medications, etc. while relying on long-term care coverage for assistance with dressing, bathing, and other daily activities.

Understand Available Benefits

Before exploring additional coverage options, take stock of any long-term care benefits you already have or may qualify for. For instance:

• Federal and state Medicaid programs cover long-term care for low-income individuals. Benefits vary by state but often include some nursing home care and at-home services. To qualify, you must meet strict income and asset limits.
• Veterans may qualify for long-term care through the Department of Veterans Affairs if they require assistance with everyday living for a condition related to their military service.
• Some life insurance policies have riders that pay out funds if you’re diagnosed with cognitive impairment or become unable to perform “activities of daily living.”
• Your employer may offer group long-term care coverage. Review your benefits guide to see if it’s included.

Where Do You Want to Receive Care?

Another key question is where you want to receive care when needed. Do you wish to remain at home with assistance? Or do you prefer moving to an assisted living community or nursing facility? Answering this can help guide both your financial preparations and insurance selections.

For in-home care, expect costs ranging from $150 per day for a home health aide up to $450 per day for round-the-clock care. Assisted living communities’ monthly fees often range from $4,000 to $8,000 depending on services provided and location. Nursing home care costs over $107,000 per year for a semi-private room or over $120,000 for a private room on average nationally.

How Much Can You Afford to Spend Out-of-Pocket?

Now that you know what to expect cost-wise, it’s time to examine your finances to determine how much you could afford to pay out-of-pocket if necessary. This helps assess whether you should earmark savings for future care costs or look into additional insurance. Most Americans currently tap personal savings to cover long-term care bills, but this drains assets that could otherwise fund retirement. Setting aside even an extra $100 per month today into an investment fund earmarked for care can yield over $40,000 in 30 years (given a 6% average annual return). But that still may not fully cover expected costs.

Alternatives for Supplemental Coverage

If your current benefits and projected savings appear insufficient, below are some alternatives to close the gap:

Traditional Long-Term Care Insurance

This type of policy pays part of your long-term care costs up to a specified dollar limit. Key variables that impact premiums include:

• Daily benefit amount (often $100 to $450 per day)
• Benefit duration (e.g. 2 years, 5 years)
• Inflation adjustment, if any, to the daily benefit
• If home care is covered.

For instance, a healthy 55-year-old woman may pay around $3,700 per year for a policy paying up to $400,000 in total benefits. Costs rise significantly after 60. But shop policies carefully to avoid gaps in coverage.

Hybrid Life/Annuity Policies

Rather than traditional long-term care insurance, some prefer “hybrid” life insurance or annuities that pay out funds if long-term care is needed. These can cost less than standalone policies.

Self-Insure in an Investment Account

You can proactively save for care in investment accounts like Health Savings Accounts (HSAs) or high-yield savings accounts. HSAs offer tax advantages for medical expenses. The downside is returns aren’t guaranteed.

Please call us for help and more information.

In this issue:

Getting Your Money’s Worth: When Return of Premium Life Insurance Makes Sense

Who Will Care for You? Long-Term Planning for Your Golden Years

Getting the Most from Medicare: When Medigap Makes Sense

Ambulatory Surgery 101: What You Need To Know About Costs and Coverage

Are You Making These 4 Life Insurance Mistakes and Putting Your Family At Risk?

The information presented and conclusions within are based upon our best judgment and analysis. It is not guaranteed information and does not necessarily reflect all available data. Web addresses are current at time of publication but subject to change. SmartsPro Marketing and The Insurance 411 do not engage in the solicitation, sale or management of securities or investments, nor does it make any recommendations on securities or investments. This material may not be quoted or reproduced in any form without publisher’s permission. All rights reserved. ©2023 The Insurance 411. www.theinsurance411.com Tel. 877-762-7877.