According to certified financial planner Jane Young, as your retirement grows closer, the decision on how to pay for potential long-term care expenses becomes a serious concern.
She writes that the high costs of long-term care and what she says are the high costs of Long-Term Care Insurance, there isn't an easy solution.
You may have seen the initials "LTC." LTC stands for 'long-term care' and refers to the services and supports you will need at some point in your life with daily living activities or supervision due to memory loss. This care is both assistance with medical or nonmedical personal care needs.
The activities of daily living typically include things you learned how to do as an infant, including eating, bathing, dressing, and using the toilet and continence. People require extended care due to an illness, accident, or the impact of getting older.
Need for Long-Term Care Increases with Age
As we get older we are more likely to need some type of extended health care. You probably have noticed changes in your health and body in the past twenty years. Just imagine the changes in your health, body, and mind in the next 20+ years and the impact these changes will have on your family and finances.
Ways to Pay for Future Long-Term Care Services
Young says when you have long-term care expenses they can be paid with a combination of personal or family savings and Long-Term Care Insurance.
Medicaredoes not cover most long-term care expenses. Medicarewill provide 100 days of nursing home care after a three-day stay in a hospital. Medicaid will pay for long-term care after most of your assets have been depleted, but Medicaid is usually limited to nursing home care.
Deciding if You Purchase Long-Term Care Insurance
She says the decision as to whether or not to purchase Long-Term Care insurance is straightforward for the affluent. For those with little or no assets, they must rely on Medicaid for their long-term care expenses.
The decision is more complicated for those who can't afford to self-insure but want to protect their assets to provide a livelihood to a surviving spouse, an inheritance to children, or avoid being a burden on their family.
Partnership LTC Insurance
This is where the Partnership Long-Term Care Insurance program can be very beneficial. Even a small policy provides substantial dollar-for-dollar asset protection. LTC Insurance is custom-designed, and premiums can vary over 100%. Shopping with a Long-Term Care Insurance specialist can help you find the best coverage at the best value.
Young writes that individuals who are at the greatest risk for needing long-term care services are those with a history of a chronic condition such as high blood pressure or diabetes or have family members with a chronic condition history.
You may also have a higher risk of long-term care if you have poor health or poor diet and bad exercise habits. Women are at greater risk of needing long-term care than men because, on average, they live five years longer, she says.
Even if you have good health and diet and exercise habits, you are at high risk since your longevity will be greater. As you get older, you increase your risk of cognitive decline. Either way, planning for the financial costs and burdens of aging is an essential part of a retirement plan.
Access Choice of Quality Care
Long-Term Care Insurance offers you guaranteed tax-free benefits to access your choice of quality care either in your home or in a facility. You maintain your control and independence, and your family has the time to be family.
The best time to start researching long-term care is when you are in your 40s or 50s. Generally, your health will be better and it will be easier to qualify for coverage. LTC Insurance is medically underwritten, with each company with its own underwriting rules.
Premiums are based, in part, by age at the time of application, health, family history, and the amount of benefits you wish to have in place.
Give your family peace-of-mind knowing you have a plan, and they will have the time to be family.
Planning for a successful future retirement is essential for both your family and your finances. There are several types of policies available. However, seek the assistance of a competent Long-Term Care specialist. They will help you design a plan that best fits your needs and concerns and then shop for the best policy at the best value. Click here to find a specialist.
Items to Discuss with an LTC Insurance Specialist
- Partnership – Most states offer special policies that provide dollar-for-dollar asset protection. The Long-Term Care Insurance Partnership Program might be one of the best-kept secrets in retirement planning. Make sure the specialist explains this program and how it might help you.
- Tax incentives – There are federal tax incentives available for some people. If you own your own business, be sure to ask.
- Health Savings Accounts – If you have an HSA you can use the pre-tax money in your account to pay for the premium.
- Asset-Based or Hybrid policies – These are life insurance or annuities with a rider for long-term care. Careful, only a handful are actually a long-term care benefit. However, one of these policies can provide you with the flexibility of both a long-term care benefit or a death benefit. They are expensive but can be paid with a single premium.
- Health and Family History - Make sure the specialist asks you detailed questions about your health, family history, and retirement plans. Underwritingcriteria vary with each insurance company. If they are not asking you detailed questions, then find another specialist.
Find the Current and Future Cost of Long-Term Care Services in Your Area
Review the LTC NEWS Cost of Care Calculator. You will discover the current and future cost of long-term care services where you live. You will also find the availability of partnership plans and tax incentives that may be available in your state. Click here for the calculator.
Planning for the financial costs and burdens of aging is more than just about money. It is all about family and how your future need for extended care impacts your family. Without advance planning, your family will go through crisis management. They will either become caregivers or will end up managing your care while spending your money. Either way, this placing a huge amount of pressure and stress on them.
Be sure you start planning before your health changes. Every insurance company has different underwriting criteria. It is always best to start your research in your 40s or 50s, but a specialist can help you at most ages.