The Senate Finance Committee has advanced legislation that would allow individuals to pay up to $2,500 each year for Long-Term Care Insurance with their 401(k), 403(b), and IRAs without a tax penalty.
Early withdrawals from these accounts are generally treated as income and taxed accordingly and are also subject to an additional 10 percent tax on early distributions. As most people who purchase Long-Term Care Insurance are in their 50s, this legislation, the Long-Term Care Affordability Act, if it becomes law, would make it easier for many people to purchase LTC Insurance.
Traditional health insurance and Medicare, including supplements, pay a limited number of days for skilled long-term health care services. Most long-term health care is defined as 'custodial' - meaning help with daily living activities or supervision due to dementia.
Long-Term Health Care Affects Families and Finances
Without Long-Term Care Insurance, families must use their income or drain savings to pay for care. Long-term health care is getting more expensive, and the costs are rising sharply due to inflation, rising labor costs, and increasing demand for services.
The LTC NEWS Cost of Care Calculator shows that these skyrocketing costs can significantly affect the lifestyle and legacy of most American families - Cost of Care Calculator - Choose Your State | LTC News.
As a result, many families must either seek an adult child to become a caregiver or enter the Medicaid program once their assets are drained. Medicaid will pay for long-term health care only when the care recipient has little or no income or assets.
States Overwhelmed with Medicaid Costs - Some May Tax Those Without LTC Insurance
Medicaid has become the largest payer of long-term care services in the United States. These costs are adversely affecting state and federal budgets. As a result, the State of Washington has instituted a tax, effective in 2023, on those individuals who do not own a qualified Long-Term Care Insurance policy. Multiple states are now in the process of following Washington's considering their own long-term care tax. California and New York are close to implementing a plan.
Senator Pat Toomey (R-PA), the sponsor of the legislation, said it is a commonsense change to enhance financial security in retirement.
The onset of a chronic illness requiring nursing home or in-home care too often has the potential to financially devastate older Americans.
Senator Pat Toomey
In the House, Congresswoman Ann Wagner (R-MO), the Chair of the House Suburban Caucus, introduced the House version of the Long-Term Care Affordability Act.
Rep. Wagner says that the cost of long-term health care is often insurmountable. She says the legislation would enable seniors to cover the cost of long-term health care by providing better access to their retirement savings.
Retirement can be expensive enough for seniors, and we should be using every tool we have to make their lives easier and more affordable. This legislation would do just that by providing for favorable treatment of long-term care through retirement accounts, allowing greater access to the necessary care they deserve.
Rep. Ann Wagner
Long-Term Care is a Considerable Risk
Sen. Toomey says that about half of individuals who reach age 65 will need some long-term health care. The senator says that more than half of American households contribute to retirement accounts. If the legislation were to become law, all of them would be eligible to pay for Long-Term Care Insurance with retirement savings under this legislation.
Individuals who have Health Savings Accounts can already use some of the pre-tax money in their HSA to reimburse themselves for the cost of LTC Insurance. The Toomey/Wagner legislation would offer another source of funds that can be used to purchase LTC Insurance.
Some asset-based products are currently available that allow the use of qualified funds to purchase qualified hybrid Long-Term Care Insurance policies. Hybrid policies combine life insurance along with a qualified rider for long-term care. Money is transferred directly from an eligible retirement account to this product. However, taxes are still, but the product adds a bonus offering larger benefits to cover the tax implication.
LTC Insurance Offers Guarantees
Long-Term Care Insurance provides guaranteed tax-free benefits that can give the policyholder the ability to access their choice of quality care options, including in-home care.
Premiums are affordable for many people if purchased younger when they still enjoy good health - How Much Does Long-Term Care Insurance Cost? | LTC News.
Most states also have available Partnership Long-Term Care Insurance. These specially qualified policies provide additional dollar-for-dollar asset protection.
About the Author
Contributor since April 22nd, 2021
You may soon be able to use your retirement funds to protect your retirement funds - insurance for your 401(k). The current economic environment is a good example of why the guaranteed benefits of Long-Term Care Insurance are so necessary for retirement planning.
Long-term care is a cash flow problem but don't forget it is also a family problem. Family caregivers must often set aside their lives to become caregivers, something they are usually unprepared and untrained to do.
LTC Insurance is access to quality care that gives your loved ones the time to be loving and supportive and not have to be burdened as a caregiver.
Most people obtain coverage in their 50s.
Seek Professional Help Planning for Long-Term Care
Long-term care is a very specialized area, and few insurance agents and financial advisors have the expertise. Find a specialist who represents the top companies as premiums can vary over 100% between insurance companies. Leading specialists will often have over 500 clients with Long-Term Care Insurance.
A specialist will save you money, and you will have peace of mind knowing they are making the appropriate recommendations - Work With a Specialist | LTC News.
Experts recommend seeking the help of a qualified and experienced Long-Term Care Insurance specialist to help you find the right coverage. A specialist will match your age, health, and family history with the right coverage at the right price.
Available Resources and Planning Tools on LTC NEWS
Planning for the future is never easy, but long-term health care planning can be very complicated and comes with many emotions. Getting the right tools and resources will make the process much easier.
One of the goals is to reduce the stress and anxiety usually placed on your family at the time of crisis. LTC NEWS can be beneficial in providing you with important information for you to consider.
LTC NEWS has put in place several resources, including:
The LTC NEWS Cost of Care Calculator will show you the current and future cost of long-term health care services where you live. Plus, each state has vital state-specific information you should know - Cost of Care Calculator - Choose Your State | LTC News
The Ultimate Long-Term Care Guide is an outstanding read to help you get a good overview of the topic area.
Compare the major insurance companies that offer Long-Term Care Insurance products here - Top Insurers for Long-Term Care Insurance | LTC News.
A detailed tax guide that includes available tax incentives can be found by reviewing the Long-Term Care Tax Benefits Guide.
You might have questions and LTC NEWS provides the answers for many of the most asked questions here - Frequently Asked Questions | LTC News. Find all the resources available on LTC NEWS - Resources for Long-Term Care Planning | LTC News.
Getting Help for Older Parents
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 -
Free Assistance in Filing a Long-Term Care Insurance Claim
Many insurance companies have issued Long-Term Care Insurance policies over the years. Filing a claim can sometimes be complicated unless you know what to do or get expert help and assistance.
Don't allow the claim process to stop you from using the benefits available in an LTC policy. Quality care obtained early will help provide a better quality of life and reduce the risk of a deep decline and facility care.
If you need help in starting the process of a Long-Term Care Insurance claim, LTC NEWS can help. LTC NEWS provides free assistance with no obligation to help you or a loved one complete the claims process with a Long-Term Care Insurance policy. We have teamed up with Amada Senior Care, who will do all the work - free with no obligation.
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 | LTC News.
Advantages of Reverse Mortgages
Today's reverse mortgages for those aged 62 and older could be an ideal resource to fund a Long-Term Care Insurance policy OR even provide money to pay for care if you, or a loved one, already needs help and assistance. You might be eligible at younger ages as well.
Some people have much of their savings invested in their homes. With today's reverse mortgages, you can find ways to fund care solutions, care itself, and even help with cash flow during your retirement.
Learn more by asking questions to an expert. Mike Banner, LTC NEWS columnist and host of the TV Show "62 Who Knew" will answer your questions regarding caregiving, aging, health, retirement planning, long-term care, and reverse mortgages.
- Just "Ask Mike." - Reverse Mortgages | LTC News.
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You can write a story or ongoing column for LTC NEWS. You can write about many topics, including aging, caregiving, health, lifestyle, retirement planning, and long-term care, to name a few.
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