One of the most urgent problems in the United States and the rest of the world is longevity and long-term health care. Population demographics show the country and most of the world getting grayer. As Generation X and the Late-Boomers aging in mass, and the remaining Baby-Boomers continuing to get older, we are getting close to the tipping point.
The primary insurance program for people age 65 and beyond is Medicare. Medicare and supplements that are available do not provide long-term health care benefits for chronic disabling conditions and other aging and cognitive problems.
The economic impact of long-term health care has on American families is enormous. Even those families with substantial savings can see an adverse impact on their assets. Those considered to be in the middle class could see a long-term care situation wipe them out where they would have to access the Medicaid program.
Care Cost Increasing
The cost of long-term care services varies depending on where you live; however, the cost is expensive and will continue to get more costly in the decades ahead. The LTC NEWS Cost of Care Calculator shows the national average cost of a nursing home running over $100,000 a year. Home care and assisted living may cost less but remains expensive. You can see the current and future cost of extended care services by clicking here.
There is an economic burden on American families due to the financial impact of long-term health care. There are also consequences on family members who are often placed into the role of being a caregiver.
Until the economic downturn due to COVID-19, the economy had enjoyed record growth. The markets are still doing well giving people the impression they may have enough personal savings to pay for their own future extended care.
Economic Events Happen – Often Unexpectedly
However, one lesson many people have learned is that you can never predict events that can have an adverse effect on the markets and the economy in general. The last financial crisis came in 2008 — when we had the bursting of the housing bubble. Like the current virus crisis, some of these events have nothing to do with the economy but results in an economic downturn. You also cannot predict when you will need long-term care and for how long.
Experts continue to recommend planning for the financial costs and burdens of aging need to be an essential part of your retirement planning.
“In our current economic conditions and uncertainties, having benefit guarantees to cover your long-term care needs can eliminate the concern of financial changes to your retirement plan strategy,” said Liz Pace, an Atlanta based wealth management expert.
Pace says that health care costs is the number one concern for most pre-retires. She explains that having a long-term care plan with benefit guarantees can alleviate a lot of this concern.
“With language about the dollar’s future value, the uncertainty of the economy and real estate market, many may question where they should be saving and where they should be spending. Considering long-term care coverage as a risk transfer strategy can increase the confidence in your overall plan as the benefits are guaranteed and lessen the concern of asset utilization and depletion as you age, Pace said.
Consequences of Long-Term Care Impacts Family and Finances
While the risk of needing long-term care is high, many people ignore the problem until it becomes a crisis. People require long-term health care due to an illness, an accident, or the consequences of getting older. Those consequences are two-fold: long-term care presents a cash flow issue, AND long-term care presents a family issue.
The need for long-term care can cause the depletion of lifetime savings. As a person's income become inadequate to cover the high cost of care, it starts to drain savings. The result – long-term care dramatically reduces one's standard of living or forces a family to purchase less care than they need or have adult children become caregivers. Neither is a good solution for quality care and presents numerous other problems.
Most people in surveys indicate they want to avoid a nursing home. Yet, by lack of planning, the economic factors will often force people to enter a nursing home since, generally, Medicaid coverage typically only covers a nursing home. You must have little or no assets to qualify for the Medicaid Long-Term Care benefit.
LTC Insurance Offers Guaranteed Tax-Free Benefits
Long-Term Care Insurance provides the guaranteed tax-free benefits to pay for your choice of quality care, including home care. In 45 states, Long-Term Care Partnership policies provide dollar-for-dollar asset protection (click here to see if your state has a partnership plan in place).
You will be able to shelter part of your estate even with a small policy. Some experts say this is one of the biggest secrets in retirement planning. Many financial advisors and general insurance agents have little knowledge of the partnership program or LTC Insurance in general.
LTC Insurance also has several tax incentives that are available. Plus, those with a Health Savings Account can use the pre-tax money in their accounts to pay for the premium. You can learn more about the tax benefits by clicking here.
Don't forget the family aspect of long-term care planning. Being a caregiver is a difficult job placing physical, emotional, and even financial burden and pressure on the caregiver and the caregiver's family. When you have a policy in place your family will be given the time to be family.
LTC Insurance Beneficial No Matter the Economy
Even when COVID-19 disappears, and the economy is fully recovered, LTC Insurance will still offer tremendous value. Benefits from a policy are tax-free, and you get to keep your assets under your control, allowing you to protect your lifestyle and legacy.
Remember, Long-Term Care Insurance is medically underwritten. You can't wait until you need care to purchase a policy. The ideal window to plan is when you are in your 40s or 50s when you still usually enjoy relatively good health. Premiums are very affordable; however, premiums can vary over 100% between insurance companies for the same benefits.
Seek help from an experienced specialist to help you plan. You can find a trusted and qualified specialist by clicking here. Your health can change at any time, and the economy can change at any time. Prepare your finances and protect your family from the consequence of aging – but do so before you do get old.
About the Author
Linda is a freelance writer interested in retirement planning, health and aging.
Contributor since October 31st, 2017
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