According to the U.S. Department of Health and Human Services, today’s 65-year-olds have a 70 percent likelihood of needing long-term care at some point in their lives.1 That means long-term care will be a reality for many retirees.
Long-term care is extended assistance with basic daily functions such as bathing, mobility and eating. It’s often provided in a facility or in the home, and it’s usually needed because of a chronic health condition or a cognitive issue such as Alzheimer’s.
Whether provided in a facility or in the home, such care can be costly. A recent Genworth study found that the average monthly cost of an extended living facility was $3,750. A full-time home health aide cost more than $4,000 per month.2 Many retirees need long-term care for many months or even several years.
Fortunately, there are tools you can use to limit the impact long-term care has on your retirement. One such tool is long-term care insurance. You pay premiums to an insurance company and, in return, it covers some or all of your long-term care expenses in the future.
Is long-term care insurance the right strategy for you? There’s no correct answer for everyone. It depends on your budget, needs and goals. Below are a few questions to ask yourself as you consider your long-term care options:
How is your health?
Common sense would suggest that the healthier you are, the less likely you are to need long-term care. Actually, the opposite could be true. Your good health could actually increase your likelihood of needing long-term care.
Retirees struggling with health issues in the early years of retirement often pass away before they need long-term care. Those struggling with cancer or heart ailments may not reach the later ages of retirement. However, those who are healthy could live to age 80, 90 or beyond.
If you reach the later ages of retirement, you may struggle with cognitive issues, or you may simply have trouble taking care of yourself. It might be necessary for you to hire a part-time aide or even move into an independent living facility. Don’t assume that your good health today means you won’t need care in the future. It could mean the opposite.
Is your goal to stay in your home?
Many retirees assume that long-term care insurance can only be used to cover nursing homes. There was a time when long-term care policies only covered care provided in a facility. Today, most policies cover care provided either in the home or in a facility. Some even provide coverage for home modifications and even reimbursements to family members who provide care.
If you’re like most retirees, you want to stay in your own home as long as possible, even if doing so requires some assistance. Long-term care insurance can help you accomplish that goal. Without coverage, you may be forced to use Medicaid to pay for care, and Medicaid may require you to leave your home for a facility. Far from being so-called nursing home insurance, long-term care coverage can actually be a tool to help you stay in your home.
What’s your backup funding plan?
Perhaps the most important question is how you will pay for care if you don’t have long-term care insurance. You’ll need some other strategy. You could self-fund with your retirement assets, but that may be unsustainable over a long period of time.
You could count on children or other family members for support. However, long-term care is often a full-time responsibility. Consider whether your kids or other relatives have the time or ability to provide the level of care you may need.
Finally, you may plan on using Medicare and Medicaid to pay for your care. Unfortunately, Medicare usually doesn’t offer funding for long-term care. Medicaid will cover care, but only in a facility and only after you’ve depleted your own assets. Also, you may find that your options under Medicaid don’t meet your own expectations.
Ready to develop your long-term care strategy? Let’s talk about it. Contact us today at Oliver Financial Group. We can help you analyze your needs and create a plan. Let’s connect soon and start the conversation.
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17509 – 2018/3/26