When you think about your ideal retirement, your vision probably doesn’t include an extended stay in a nursing home or assisted living community. According to new research, however, long-term care could be a reality for many retirees. The U.S. Department of Health and Human Services estimates that retirees have a 70 percent chance of needing long-term care at some point in their lives. While the average senior will need care for nearly three years, 20 percent of seniors will need it for more than five years.1
Long-term care is extended assistance with basic daily living activities such as bathing, eating, mobility and more. It’s often provided in facilities like assisted living centers, but it can also be provided in the home by a friend, a relative or even a paid specialist.
Regardless of where the care is provided, it’s usually a costly service. Professional care can cost thousands of dollars per month, and care is often needed for several years. If you don’t have a strategy in place, long-term care can quickly deplete your retirement assets.
You can minimize the long-term care risk by developing a strategy in advance. Below are four common methods seniors use to address their long-term care needs. A financial professional can also help you determine which strategy is right for you.
Out of Pocket
You always have the option to pay for long-term care directly out of your retirement savings. In fact, that could be your strategy by default if you don’t have another plan in place. However, it’s unlikely that most retirees will have the assets to fund an extended need for long-term care.
Every year, Genworth conducts a study of average long-term care costs. In 2018 the study found that the average assisted living facility cost $3,750 per month. A full-time in-home health aide cost even more, clocking in at $4,000 per month on average.2
If you or your spouse should need care for several months or even years, consider the financial impact it would have on your savings. Even if you were able to pay for care directly, you could deplete your legacy for loved ones or savings available for your surviving spouse. While you may have to pay for some costs directly, don’t plan on funding all your long-term care needs with your retirement savings.
Think Medicare will cover all your health care costs? Think again. Medicare is a valuable resource that covers a wide range of medical expenses in retirement. However, it doesn't cover everything. In fact, long-term care is one of the costs that’s usually not eligible for Medicare coverage.
You may be able to use Medicaid to pay for long-term care. However, Medicaid eligibility comes with a catch. In order to qualify, you must have few assets and little income. Many seniors spend down their own assets to pay for care, then transition to Medicaid coverage in the later years.
However, you may not want to deplete your assets and then rely on Medicaid. Perhaps you want to leave a legacy for your children and grandchildren. Maybe you prefer a higher quality of care than is available under Medicaid coverage. If so, you’ll need to plan for an alternate funding method.
Long-Term Care Insurance
A long-term care insurance policy can be an effective tool to minimize your out-of-pocket costs. You pay premiums today, and in return, an insurer covers some or all of your long-term care costs in the future. Depending on the policy, you can make one lump-sum premium payment or make a series of regular payments over time.
Today’s long-term care insurance policies offer a wide range of features and the flexibility to meet any goal or budget. You can find policies that cover care provided either in the home or in a facility. Some policies cover home modifications to accommodate a wheelchair, hospital bed or other health care equipment. Some policies will even provide a death benefit to your loved ones if you don’t use all the coverage.
Ready to develop your long-term care strategy? Contact us today at Baacke Insurance Services. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.
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18148 - 2018/10/17