The State of Washington was the first state in the nation to institute the LTC Tax. The tax will cost working people in the state an uncapped 0.58 percent employee-paid payroll tax (which calculates to $580 for every $100,000 in income) to pay for a minimal benefit intended to pay for your future long-term care.
The Washington State Employment Security Department says 484,704 people filed their exemption paperwork because they own private Long-Term Care Insurance. Nearly 482,000 of those petitions were granted. Some still need to be processed.
Elizabeth Hovde, the policy analyst and Director of the Centers for Health Care and Worker Rights, says she expects more people to file for their exemption from the "short-sighted, burdensome and unfair long-term-care law and the mandatory social program it created."
State Controlled LTC Fund
The Washington Care Fund offers a relatively meager long-term care benefit. The primary purpose is to fund the state's Medicaid program. Many people in Washington decided they could better prepare for their own long-term health care with private LTC Insurance. Long-Term Care Insurance will provide substantially more long-term care benefits, and those with a policy also avoid the tax.
Hovde says the state thinks they know better than the public.
The law has the state telling people which life needs they can save for and then deciding how to invest their savings for them. Worse, not all of the workers who pay in for 10 years or more will see a return on their investment.
Hovde says the state plan has many flaws, in addition to the cost.
Move out of the state? No Washington Cares money for you. Take a break of five years or more in your career years to raise kids or give care to a family member? You've been voted off the Washington Cares island. Don't meet health qualifications decided by the state? Parting from your income unnecessarily is such sweet sorrow.
A new payroll tax collection will begin in July 2023 for the vast majority of W-2 workers. That comes after the tax, which the Legislature imposed a year ago, was delayed for 18 months. The state will start deducting 58 cents from every $100 a worker earns in Washington.
Washington Cares Provides Little for Long-Term Health Care
The need for long-term health care is a real risk, and the costs are substantial. But Hovde points out that this has been one of the problems with the Washington Cares Fund (LTCTax) from the start.
The inadequate lifetime benefit of $36,500 (adjusted with inflation) should not give people peace of mind about their possible long-term-care needs.
The LTC NEWS Cost of Care Calculator shows that the current care cost in Washington is rising rapidly. For example, in Seatle, a month of care at home, based on a 44-hour week, is now averaging $6,883 a month. In 2050 that cost is expected to run $14,132 a month. Assisted living facilities, memory care, and nursing homes are also very costly.
No thank you" is one of the nicer things Washingtonians say about Washington Cares and lower paychecks.
Other States Looking to Add the LTC Tax
Several other states are looking to follow the lead of Washington. California, New York, Illinois, Michigan, and Minnesota are just a few. Unlike Washington, those states may not give much or any time for their residents to purchase private Long-Term Care Insurance to avoid the tax.
Whether there is an upcoming tax or not, preparing for the rising cost of long-term health care should be part of a retirement plan. Most people get coverage in their 50s, unlike in Washington, where many younger residents bought policies to avoid the tax.
With LTC Insurance, you can have guaranteed tax-free resources to pay for your choice of quality care services. Your policy will protect your 401(k) and other assets and relieve some of the stress and anxiety otherwise placed on your family. But you would remain in control and be dependent on the state without paying a tax.
About the Author
Linda is a freelance writer interested in retirement planning, health and aging.
Contributor since October 31st, 2017
There are drawbacks to longevity. Being ready before you suffer from chronic illness or aging problems gives you the power to remain in charge, preserve your assets, access the high-quality care of your choosing, and give your loved ones more time to spend with as family rather than as caretakers. Long-Term Care Insurance is the solution to prepare for the expenses and burdens of aging.
Seek Professional Help
Long-Term Care Insurance can be complicated. There are several insurance companies, different plans, underwriting differences, and pricing can vary over 100% between insurance companies.
Getting help from an experienced Long-Term Care Insurance specialist who works with the top insurance companies will help you navigate these differences. They can ensure you are matched with the best coverage at the best value.
Financial advisors and general insurance agents usually have little experience in this area and often only work with one insurance company.
Many people find LTC Insurance affordable, especially if they are in good health. Most people obtain coverage in their 50s to take advance of lower premiums along with better health. Long-Term Care Insurance is also custom designed.
Have Questions About Long-Term Care Planning?
LTC NEWS has many tools and resources that can help you in your research as you prepare for your future retirement and plan for the costs and burdens that come with aging and declining health.
Loved Ones Need Help Now?
Get help finding quality caregivers or long-term care facilities and get recommendations for a proper care plan, whether a person has a policy. - Filing a Long-Term Care Insurance Claim.
If your loved one is lucky enough to own a Long-Term Care Insurance policy, be sure they use it. Sometimes families wait, thinking they can save the benefits for a rainy day. Waiting on using available Long-Term Care Insurance benefits is not a wise idea.
If your parent or parents need help, be sure to get them quality care. LTC NEWS can help. We have put together several comprehensive guides to help you in your process.
Start by reading our four guides -
The Benefits of Today's Reverse Mortgages
Some people have a large portion of their savings in their homes. With the help of reverse mortgages, you can find ways to pay for quality in-home care, pay for LTC Insurance, and even assist with cash flow during retirement.
Yes, today's reverse mortgages may be the perfect way to pay for a Long-Term Care Insurance policy or even cover the cost of in-home care if you or a loved one is currently in need.
Asking an expert with your questions will help you learn more. Mike Banner, a columnist for LTC NEWS and the host of the television program "62 Who Knew," will respond to your inquiries about long-term care, reverse mortgages, aging, and health.
- Just "Ask Mike." - Reverse Mortgages | LTC News.
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