More Focused on Your Funeral Instead of Longevity and Long-Term Care?June 6th, 2019
As a long-term care specialist, Mary Ann DeKing has extensive experience helping people plan for the financial costs and burdens of aging. Many people would rather think of other issues. However, the impact of long-term care touches family and finances.
Breaking news … you have a 100% chance of dying. Good chance you have planned, or at least thought about your funeral. According to a new survey, more middle-income Americans have planned for that future funeral than have planned for the substantial costs that come with future long-term care services and supports.
Despite this, most people are discussing the potential impact of long-term care. There is a good reason, the U.S. Department of Health and Human Services indicates if you reach the age of 65 you will have a seven in ten chance of needing some long-term care service before you pass-away. The question is when will you need extended care and for how long. Some people with a family history of certain specific health conditions like Alzheimer’s, for example, may be of higher risk.
America is getting older. 10,000 people turn age 65 each and every day. A recent survey conducted by Banker’s Life indicates that 81% of those aged 54 to 72 have a plan for their funeral but only 32% have plans for how they will receive and fund long-term care. Unfortunately, too many people plan for a family member to care for them … or they think health insurance, Medicare or their Medicare Supplement will pay for it. Some people think they can pay for care themselves and others think it will never happen to them.
The cost of long-term care is not inexpensive and continues to increase each year. The national average for one year of care at home, based on a 44-hour week, runs almost $4200 a month. Base assisted living facilities average $4000 a month. Skilled nursing homes are very expensive and average almost $8400 a month. The cost of care varies based on your location.
This means a 54-year-old today will incur enormous costs in the years ahead. Based on past trends, in 30 years when that 54-year-old is 84 the cost of this care will be dramatically higher. The average for one year of care at home is expected to run $10,182 a month 30 years from now. Base assisted living facilities average will run $9700 a month. You think that is expensive, in 30 years the national average for skilled nursing is expected to run over $20,000 a month.
The survey showed that 79% said they have nothing set aside for these costs. For those who do have money put-away for long-term care the amount saved is only $40,000. It is not that they would be surprised if they need long-term care as 67% indicated they personally know someone who required extended care services. In addition, 36% of those surveyed admitted that they could not depend on family members to provide their care.
Have you prepared for these costs and the impact long-term care will have on your family? You probably have not yet done so. The easiest way to plan is to avoid ever needing long-term care in the first place. Since it is impossible to avoid it what can you do?
Since the 1970s people have turned to Long-Term Care Insurance. These policies are working for American families. In 2018 alone the major insurance companies paid for $10.3 Billion in long-term care benefits.
Decades ago these were just policies which paid for nursing homes. Today’s policies pay for all levels and types of long-term care including care at home. Most claims actually start at home according to research from the American Association for Long-Term Care Insurance.
Too many people assume Long-Term Care Insurance is expensive or they would just take the premium and invest it each year.
Going back to the 54-year-old, let’s assume a healthy couple, both age 54, get a policy. They could purchase a traditional policy offering $4000 a month, with $150,000 each growing 3% compounded each year and pay about $230 a month. Premiums can vary from company to company and are influenced by the amount of benefits you purchase, inflation option you select, and your health. In 30 years, you would have paid about $70,000 but your benefits would be substantial. You would each have $364,089 in benefits with $9709 a month to pay for your care. Many companies offer shared benefits which allow you to use some of your spouse’s benefits if you exhaust your own.
What happens if you just invest the $230 a month? If you earned 6% compounded you would have a pre-tax amount saved of $247,299.41 compared to the $728,178 this couple would have in tax-free benefits in their long-term care policy.
45 states offer Long-Term Care Partnership policies which provide additional dollar-for-dollar asset protection. In the event you exhaust benefits you are able to shelter part of your estate based on the amount of benefits paid and still access Medicaid. Medicaid otherwise requires you to exhaust almost all your assets in order to qualify.
There are also asset-based policies available. These are referred to by the industry as “hybrid” policies. A single premium can bring you a substantial amount of long-term care benefit as a rider on a life insurance or annuity policy. Some offer annual payments. The big difference is the ability to guarantee you will get money from the policy no matter what … live, die, or just change your mind.
People think of Long-Term Care Insurance as asset protection. It is. However, there are many consequences that come with longevity. If you don’t have a policy in place your family will have the responsibility. Caregiving is hard on loved ones in many ways. There is the physical impact of being a caregiver which becomes harder as the caregiver themselves get older as years go by. There is also an emotional impact on your family. Plus, your kids will probably have their own careers, families, and responsibilities which make being a caregiver or managing care very difficult.
If they are using your money to pay for care what account would they drain first? Would your children make the same choices as you would? What about lifestyle, especially the lifestyle of the otherwise healthy spouse? Your savings can drain fast.
Experts say the best time to plan is when you are in your 40s or 50s. Long-Term Care Insurance offers affordable benefits, tax incentives, case management, and other services to lessen the burdens on everyone, including yourself.
Start your online research by discovering the availability of partnership plans in your state, the current cost of care services, and available tax incentives. Find your state on the LTC NEWS MAP by clicking here.
Be sure to find a Long-Term Care specialist. Most financial planners and general insurance agents lack a good understanding of these policies and the health qualifications each insurance company requires. In addition, they generally have little or no experience in claims and policy design which is indispensable. Plus, a true specialist will work with the major insurance companies, not just one or two. The insurance company is probably not local, so you just need a qualified person to find you appropriate coverage at the best value.
You don’t need a person locally. Most specialists can help you no matter where you live and they will have the qualifications to help find affordable coverage and service your policy going forward. Find a specialist by clicking here.
Start planning now so you can enjoy your future retirement with peace-of-mind.