When planning for retirement, evaluating long-term care insurance options should be on your radar. According to the U.S. Department of Health and Human Services, 70% of individuals age 65 or over will require long-term care during their lifetime. A smart retirement plan and financial planning strategy will allot for potential long-term care, because the costs associated with it have the potential to make a serious dent in the funds you’ve saved for retirement.
With the elderly population expected to grow in the coming decades, the cost of long-term care is also expected to rise. Even if you think you are as healthy as can be in this moment, situations can change and it’s better to have a plan than to be caught off-guard by the unexpected. As a matter of fact, the best time to purchase a long-term insurance policy is when you are relatively healthy and still have plenty of time left before retirement. If you’re already thinking about your retirement strategy, it’s vital you consider the costs of long-term care. In fact, now might be the right time to invest in a long-term care insurance plan that fits your budget.
What is Long-Term Care?
First, let’s break down exactly what long-term care is. Long-term care includes a variety of services from home care visits by health-care professionals to placement in assisted living facilities to community services for the elderly and disabled.
When an individual can’t reasonably follow through with their daily activities, what’s referred to as ADLs (Activities of Daily Living, i.e. walking, getting dressed, eating), they’ll certainly need some sort of daily assistance. Individuals with debilitating illnesses, chronic disabilities, or suffering through the impact of a health event like a stroke, are just a few examples of someone who may have a long-term care need.
Specific long-term care services might include:
• Occupational and physical therapy
• Alzheimer's and dementia care facilities
• Assisted living facilities
• Hospice and respite care
• Skilled nursing care in your home
• Rehabilitation facilities
• Adult day care
Why Might You Need Long-Term Care Insurance?
1 Long-Term Care Costs and Coverage
Long-term care is expensive. According to MedicaidPlanningAssistance.org (a service of the American Council on Aging), the average annual cost of a nursing home in 2019 was $102, 200 for a private room, and $90,155 for a shared room. And, for the most part, these costs aren’t usually covered by standard health or disability insurance policies. Medicare and Medicaid might not be viable options either. Although Medicare may pay for a brief nursing home stay or elements of home health care related to rehab, it’s likely not a good option to rely on for long-term care.
2 To Save Your Savings
You don’t want to drain your savings if you or a loved one needs long-term care. Your retirement funds could take a massive hit if you are in need of long-term care. In that sense, it makes it harder to plan for financially. Finally, long-term care costs may impact any inheritance you may have wanted to leave to loved ones.
3 People Are Living Longer
That’s a good thing, right? But it also means that you need to factor that into the planning process. Not only is there a greater chance that you may need it (because you are living longer), but there’s also a chance you may need it for more years (yes, because you are living longer).
Finding the Right Plan
A long-term care insurance plan’s cost and coverage will vary depending on a variety of factors. Here are a few things to consider when you are talking to your financial advisor or researching plan options.
1 Age
The younger you are, the lower your premium.
2 Health
Are you fit? Do you or your family have a history of medical problems?
3 Waiting Period
A policy that begins right away will cost more than one whose waiting period is between 30-90 days. (This is why it’s a smart idea to think way ahead)
4 Benefit Choices
For example, how much will your policy’s maximum coverage pay per day? Depending on services needed, policies will differ on benefits, both on amounts paid and services covered. Check what maximum payouts are per amount and time period they cover. It’s also important to understand what healthcare conditions and needs must be present before the long-term health insurance can be activated.
Polices will differ greatly among providers and, as mentioned above, depending on your age, family medical history, and current health, costs will also. The right plan will depend on what you’re most comfortable with, from how a plan works with your overall financial goals to what type of care you’d prefer in a given situation. Before you make any decisions, check with a financial advisor or retirement planning expert to determine how long-term care insurance may fit with your retirement planning.