Are You Planning for Long-Term Care in Your Retirement? You Should Be, and Here’s How

The fall is always a busy time, with Medicare open enrollment season running through early December. This year, we’ve noticed something as we assist our clients. An alarming number of them require long-term care but are unprepared for how little Medicare covers and how much they are going to have to spend on this expense.

Unfortunately, they are not alone.

A recent study by the American College of Financial Services found that just 31 percent of retirees and pre-retirees ages 50-75 have made plans to cover their long-term care needs. Even fewer, 23 percent, actually have long-term care insurance. More than half, 52 percent, say they haven’t even thought about looking into long-term care insurance.

While you may feel healthy now and can’t imagine having to worry about long-term care, it is an important component of your retirement plan that you consider sooner rather than later.

What Is Long-Term Care and Why Does It Matter?

Long-term care encompasses services needed to help you live as independently as possible as you age. It is separate from medical care and may include things like help bathing or shopping for groceries or other instrumental activities of daily life. This is often referred to as custodial care.

Those with long-term care needs can continue to live on their own because they don’t require full-time assistance, but they do need more than a spouse or other family member can provide. Often, they move into a nursing facility to cover these needs.

Many people assume that Medicare will cover custodial care, but that’s not the case. Medicare will pick up the tab for most forms of rehabilitative care related to a particular injury. Custodial care isn’t tied to one thing and is often needed for the long term — hence the term “long-term care.” Types of long-term care may include:

· Home health aides

· Assisted living facilities

· Private or shared nursing home room

How to Prepare for Long-Term Care

Building long-term care costs into your retirement plan can save you, as well as your children and grandchildren who may be caring for you, a lot of hassle and expense. There are three main ways to save for long-term care:

1. Take out a long-term care policy. The sooner you do this, the better, as you have a greater chance of receiving approval for a policy if you are in your 50s or early 60s. Your premiums will also be lower when you start earlier. The insurance policies can be costly, but you will save money in the long run with this insurance.

2. Save in your health savings account (HSA). You enjoy tax advantages from this money, and you can keep your HSA funds for as long as you like. HSA money can fund long-term care as well as long-term care insurance.

3. Building long-term care financing into your retirement plan. You can up your retirement savings in your 401(K) or IRA to give you more money available for your retirement. Plus, you can make tax-free withdrawals in your senior years.

Interested in learning more about saving for long-term care? Jay can advise you on your best avenues. Contact him today to set up an appointment.