Apr 10th, 2019
A new research study shows we focus on death than living. Longevity continues to be a major retirement concern. The costs and impact of long-term care needs to be a key component of your planning.
Breaking news … you have a 100% chance of dying. There is a good chance you have planned or at least thought about your funeral. According to a recent survey, more middle-income and upper-middle-income Americans have planned for that future funeral than having 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 who have a family history of certain specific health conditions like Alzheimer's, for example, may be of higher risk of long-term care.
America is getting older. Ten thousand 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 take care of them. Some people think their health insurance, Medicare, or their Medicare Supplement will pay for it. Some people think they can pay for care themselves, and still, 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, according to the LTC NEWS cost of care calculator, averages almost $4400 a month based on a 44-hour week. Base assisted living facilities average $4100 a month. Skilled nursing homes are very expensive and average $8600 a month. The cost of care varies based on your location.
Find the current and future cost of long-term care services in your area be using the LTC NEWS cost of care calculator.
The cost of long-term care services will have a dramatic impact on your future lifestyle. A 54-year-old today, for example, 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 $20,300 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. Generally, that would not last very long.
It is not that people would be surprised if they needed long-term care services, as 67% said 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 avoid the impact of long-term care is to never ever need long-term care in the first place. Since it is impossible to avoid, what can you do?
Since the 1970s, people have turned to Long-Term Care Insurance. These policies are working for American families. In 2019 alone, the major insurance companies paid for $11 Billion in long-term care benefits. This money helped American families obtain their choice of quality care without draining assets or placing a burden on the family.
Decades ago these were just policies that 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 think they could just take the premium they would have used for a policy and invest it each year.
Going back to the 54-year-old, let's assume a healthy couple, both age 54, obtain 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, the 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 tax-free to pay for your care. Many companies offer shared benefits that 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.
Forty-five states offer Long-Term Care Partnership policies that 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 total 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 benefits 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 of taking care of the situation. They will decide the type of care you will receive and which funds will be used to pay for that care. Would you make the same decisions as they might in the future?
If there are few assets available, your family may also become caregivers.
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.
Also, you should consider the impact of your lifestyle, especially the lifestyle of the otherwise healthy spouse. Your savings can drain fast, which adversely impacts your income.
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.
For many American families, affordable Long-Term Care Insurance is an easy solution. 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.
Remember, needing long-term care services doesn't necessarily mean you have little or no lifestyle. Depending on the reasons you require care, with the appropriate help you can still enjoy a good quality of life. Start planning now so you can enjoy your future retirement with peace-of-mind.