Jane Young, a certified financial planner, writes on her blog about long-term care planning.
As your retirement grows closer, the decision on how to pay for potential long-term care expenses becomes a serious concern. Unfortunately, with the high cost of long-term care (LTC) and the high cost of long term-care insurance, there is no easy solution.
LTC refers to services or support to help you with medical or nonmedical personal care needs. LTC can provide assistance with cognitive impairment and activities of daily living such as eating, bathing, dressing, using the toilet and assistance with incontinence. About 80 percent of LTC is provided in the home.
Ways to Pay for Future Long-Term Care Services
When you have long-term care expenses they can be paid with a combination of personal or family savings, LTC insurance and government assistance. Generally, Medicaredoes not cover long-term care. 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
Deciding whether to purchase Long-Term Care insurance is straightforward for the affluent who can self-insure and for those with little or no assets who 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 want to avoid being a burden to family.
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 history of a chronic condition. You may also have a higher risk if you are in poor health or have poor diet and exercise habits. Women are at greater risk for needing long-term care than men because, on average, they live five years longer.
According to a 2005 study by Peter Kemper, a Pennsylvania State University professor, Harriet Komisar, a Georgetown University professor, and Lisa Alecxih, vice president of Virginia health care consulting firm The Lewin Group, on average people turning 65 will need LTC for three years. The study found that three out of 10 people will rely on family for their care for more than two of these years. The study also found that two out of 10 people will need care for over five years. Overall, the analysis in the study indicated that 50 percent will have no out-of-pocket expenditures for LTC, 25 percent will spend less than $10,000, and 6 percent will spend over $100,000.
Additionally, based on information from leading insurance actuaries, the Association for Long-Term Care Insurance reported that a 60-year-old who buys an LTC insurance policy, with a 90-day delay before coverage begins, has a 35 percent chance of using it before they die. The association also reported that the average stay in a nursing home is 2.3 years for men and 2.6 years for women. Most care is provided at home, but statistics on this are limited.
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 assist you in designing a plan which 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 a Long-Term Care 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 varies 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 Map and find your state. You will discover the current and future cost of long-term care services with the LTC NEWS cost of care calculator. You will also find the availability of partnership plans and tax incentives that may be available in your state. Click here for the LTC News Map.
Planning for the financial costs and burdens of aging is more than just abut money. It is all about family and how your family is impacted by your future need for extended care. 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.