If you’re preparing for retirement, you’re likely currently planning how you’ll address a number of risks and challenges. However, the biggest challenge you may face is the need for long-term care. Long-term care is extended assistance with basic daily activities such as eating, bathing and mobility. It’s often provided either in an assisted living facility or in the home by family members or home health aides.
According to the U.S. Department of Health and Human Services, today’s 65-year-olds have a 70 percent chance of needing long-term care at some point. The care is usually needed for a few years, but nearly 20 percent of those who need care require it for five years or more.1
As you might expect, long-term care can be financially challenging. If you don’t have a plan in place, you may struggle to get the care you need. Below are three strategies you can use to fund your future long-term care needs. A financial professional can help you develop and implement a plan.
Pay Out of Your Savings
There’s always the option of using your retirement savings to pay directly for care. However, this strategy could quickly deplete your assets. In fact, if you need the care over several years, it may be impossible to fund it completely out of pocket.
According to a recent Genworth study, the average monthly cost for a room in an assisted living facility is $3,750. In-home care isn’t much more affordable. The average monthly cost for an in-home aide is more than $4,000.2
Consider whether you could pay these monthly costs over a period of several years. It’s not hard to see how the expenses could become a drain on your assets. Even if you have a significant amount saved for retirement, it may be wise to consider alternative long-term care funding strategies.
Medicare and Medicaid
Think Medicare will cover your long-term care costs? Think again. Medicare is a valuable resource for retirees, but it usually doesn’t cover long-term care. It will partially cover care while you recover from a medical procedure, but it won’t pay for ongoing assistance with day-to-day activities.
Medicaid, on the other hand, does cover long-term care costs. This coverage comes with a catch, though. In order to qualify for Medicaid, you must have little income and few assets. This means you may have to spend most of your own money before Medicaid will kick in and cover the rest.
Long-Term Care Insurance
Long-term care insurance is a popular funding strategy because of its flexibility. You pay premiums to an insurance company and, in return, the policy pays for some or all of your long-term care costs in the future. The terms and amount of coverage depend on your specific policy.
You can usually use long-term care insurance to cover assistance provided either in your home or in a facility. Some policies will also provide coverage for home modifications, safety improvements and medical equipment. In fact, long-term care insurance could help you stay in your home longer rather than move into a facility.
Ready to develop your long-term care funding strategy? Let’s talk about it. Contact us today at Baacke Insurance Services. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.
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