A conversation about long-term care planning rarely ranks high on anyone’s “to-do” list, but because it often requires substantial financial resources, it’s not a discussion you should save for down the road. Anticipating, financing, and planning for long-term care can become quite an overwhelming proposition. These considerations may help to guide your strategy.
How likely is it that you’ll need long-term care?
A study found that one in five Americans needs help for a year or less, while one in seven adults may depend on extensive help with daily living for five or more years. But individual circumstances, including overall health, gender, and genetics, play a part, too.
Women, on average, live longer than men, and are more likely to require extensive help for longer periods of time. Lower-income people need more assistance than those with higher incomes. The older you are, the more likely you’ll need higher levels of care. Single people are also more likely to need help from a paid provider.
If you suffer from certain health conditions, like heart ailments, cognitive or neurological issues, or serious functional limitations, you’re also more likely to require assistance with day-to-day living and personal tasks, including housekeeping, finance management, transportation, personal care, and food preparation.
Consider your fitness level, too. Poor diet and exercise habits can increase your risk, because overweight or obese people tend to experience more illnesses and disabilities as they age. Better health can delay or even eliminate the need for future long-term care.
If you’re hoping to age in place as long as possible, take steps now to prepare your home. Remove obstacles like excessive furniture and rugs that become tripping hazards to reduce the likelihood of an accident. Upgrade lighting, add grab bars in bathrooms and bedrooms, and swap out all knobs and faucet handles with lever-style knobs.
Figuring out your finances sooner rather than later
According to the American Association for Long-Term Care Insurance, long-term care insurers paid $9.2 billion on 295,000 policyholders in 2017. The Association anticipates that long-term care insurance companies will pay over $100 billion in the next 10 years. The U.S. Department of Health and Human Services anticipates that nearly 70 percent of people 65 and older will require some type of long-term care. One study found that older Americans believe that individuals, private insurance, and government should share the cost burden of paying for long-term care costs.
The cost of long-term care insurance often surprises people. While more expensive than other types, many financial planners recommend buying a policy that covers two years of care which, for most people, is sufficient.
Consider ways to secure partial coverage, too. Most likely, you’re collecting retirement benefits and Social Security. While Medicare won’t cover the costs of long-term care, Medicaid will pick up some of the expenses, and so will your pension and Social Security.
Check your current term life insurance policy to see if you can add a rider for long-term care insurance. Explore the possibility of cashing out your life insurance policy to cover expenses. For some, a spousal-sharing rider makes sense. These products allow couples to purchase a designated number of years of coverage, which either spouse may use. You may choose to self-fund your care, a viable option if you carry significant financial assets.
A reverse mortgage may also be a reasonable way to generate cash quickly, but there are definite pros and cons to consider. There are no monthly mortgage payments on borrowed funds, and you can use the cash for anything. The loan is repaid only after the last surviving borrower dies or sells the home. On the downside, you’ll pay higher initial loan costs and carry ongoing mortgage insurance. The mortgage can potentially affect your eligibility for needs-based programs like Medicaid or SSI, and there’s less equity for your heirs.
No matter where you find yourself in the planning process, know that you’re not alone. For more information about long-term care programs and more specific details on the best way to pay for that care, visit LongTermCare.gov.
written by June Duncan
written by June Duncan
june
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