Two Reasons Long Term Care Should be in Your Retirement Planning
Long Term Care is unfortunately a rapidly growing segment of the healthcare market. Long term care includes care provided in a facility (Nursing Home or Assisted Living) and other costs such as in home skilled nursing, caregiver services and Adult Day care. Long Term Care is often overlooked when financial planning for retirement.
There are two primary reasons Long Term Care should be part of everyone’s retirement planning:
- Even with a healthy nest egg and savings, an extended stay in a long term care facility can wipe out these accounts. The danger is that if one spouse has to use long term care, savings are quickly depleted leaving the surviving spouse in a financial hardship.
- Fortunately, there are government programs available to pay for long term care should an individual run out of money or have no money to start with. However, when the government is paying, they control where you go.
When is Long Term Care Needed?
Long Term care is needed when an individual needs assistance with one or more of these activities of daily living; bathing, dressing, eating, continence, toileting, moving in & out of bed. Those with cognitive issues such as Alzheimer’s or Dementia may also require Long Term Care. The Centers for Medicare & Medicaid estimates that 70% of people over 65 will need some type of long term care or services during their life time**.
Average Cost of Long Term Care
Average cost of care for a Private Room in a Long Term Care facility is $6,000 per month or $72,000 per year*. The average stay in a Nursing Home is 835 days***. Using those averages, it would cost a total of $168,000. Stays related to Alzheimer’s / Dementia could be much longer. This is a worst case financial scenario. A majority of Long Term Care is received in home.
How is Long Term Care Paid for?
Since we have now established that planning for potential Long Term Care costs is an essential part of any retirement plan, what are your options to pay for it?
- Use existing assets. I would recommend earmarking $250,000 of assets. Of course this is an estimate.
- Purchase Long Term Care Insurance. This type of insurance typically pays a set amount per day for a specified period of time. This is a good option for someone in pre-retirement years (50-60). Long Term Care Insurance requires underwriting which makes it harder to get approved as you get older. However, once you have it in place, it cannot be cancelled as long as premiums are paid.
- An option that is growing in popularity is Hybrid Life Insurance Products that allow policy owners to access the policy face amount to pay for Long Term Care if needed. If not used, beneficiaries receive the entire face amount. A downside of traditional Long Term Care Insurance is if you do not use it, you get nothing back.
- Another similar option is using an Annuity with an Income Rider. Income Riders set up monthly payments, usually for the life of the policy owner. A lot of these Income Riders have provisions that pay double the monthly payment if Long Term Care is needed.
Get a No Cost Consultation
As with all our product lines, since we are an Independent Agency, we have the ability to shop several different companies to find the perfect product & company for your situation. Additionally, since we do not sell Auto & Home insurance, we consider ourselves specialist in Long Term Care, Health, Life, & Annuities. It would be our pleasure to do a no cost consultation with you.