Why Everyone Needs to Plan for Long-Term Care and How to Do It

No one wants to need long-term care. We all hope to be healthy and active as we age. But the reality is that 70% of those age 65 and older require some type of long-term care. Because of that, everyone should be planning to cover the costs of long-term care when they strategize for their financial future.

What does long-term care encompass? It’s not necessarily a spot in a senior living facility. Long-term care includes any assistance needed by people who can’t perform at least two essential activities of daily living (ADL), such as feeding themselves, bathing, dressing or getting out of bed.

Does Medicare Cover Long-Term Care?

In most cases, no. Medicare may pay for short-term nursing facility care, such as when you break a leg or recover from a serious illness, for up to 100 days following a three-day hospital in-patient stay.

But it does not cover custodial care, defined as long-term daily living assistance.

How Much Does Long-Term Care Cost?

In Pennsylvania, the average monthly cost of care in a facility with a semiprivate room is $12,187. For a private room, that rises to $13,347 per month.

It may be less expensive to get part-time home care, which in Pennsylvania costs about $32 per hour. Twenty hours per week would cost about $2,560, a fraction of the cost of a facility. Still, that’s a lot more than many people have budgeted for care in their later years.

How to Pay for Long-Term Care

Paying for long-term care is like so many things as we age — it takes preparation. You should start planning for it as soon as possible, even though you don’t know for sure if you will need it. As the saying goes, better safe than sorry.

A fifth of the over-65 population requires long-term care for more than five years, but most people need it for less. Try to plan for at least three years of care.

Here are three ways you can save for this critical expense.

Use Your Self-Funded Accounts

You can rely on your personal savings and assets to cover long-term care. This could include:

·        IRAs

·        Roths

·        401(k)s

·        Taxable investment accounts

Don’t forget about your health savings account, too, if you have one — the tax savings are a great benefit.

Purchase Long-Term Care Insurance

Timing is key for these policies. The earlier you purchase them, the lower the cost. Investing in your 50s or 60s is a good idea, and the premiums are sometimes even tax deductible. Most policies cover at least one year and up to five years of care. Look into an inflation rider to guard against rising costs. Remember, premiums will usually increase as you age.

Purchase a Life Insurance Policy With a Long-Term Care Rider

Life insurance policies offer a great alternative to a traditional long-term care (LTC) policy because your rates will never increase. You may not get as large a pool of LTC benefits but you are guaranteed not to have rate increases, and if you never use it, it will be turned into a death benefit for your loved ones. 

Purchase an Annuity With Long-Term Care Benefits

An annuity is another option if you have health conditions that would not normally allow you to qualify for traditional long-term care or a life insurance policy. There are a ton of options available that can offer a long-term fixed payments if you need help with two out of the six ADLs, like bathing, toileting transferring etc. The payments double in many cases when those needs arise and if you never use it, it will become a death benefit for your family.

Still concerned about how to plan for long-term care? Reach out to Jay to discuss the best options for your unique situation.