Long Term Care: The Time to Plan is Now

According to a report by the National Association of Insurance Commissioners, as baby boomers age, they will have to deal with one of the largest financial risks of their generation: the overwhelming majority of elderly Americans will require long-term care (LTC) in their lifetimes.

The expenditure required for long-term care often exceeds retirement income and savings and can unalterably change their standard of living and quality of life, potentially exhausting one’s assets and making the need for Long-Term Care insurance against this risk extremely critical.  Are you prepared to fund Long-Term Care expenses on our own? Typical Long-Term Care stays last 1-3 years.

Key facts about long-term care:

• According to the U.S. Department of Health and Human Services (HHS), someone turning age 65 today has almost a 70% chance of needing some type of long-term care services.
• HHS found that the national average cost for long-term care in the US in 2016 was approximately $82,000 per year for a semi-private room in a nursing home or $3,628 per month for care in an assisted living facility (costs vary widely by location and level of care).
• According to a 2018 Morningstar article, women will need long-term care for an average of 2.5 years (men for 1.5 years) and 14% will need long-term care for longer than five years.
• Medicare only pays for long-term care if you require skilled services or rehabilitative care – and only for a maximum of 100 days.
• 45% of people requiring significant long-term care help (assistance with two or more activities of daily living) are under age 65.
• 15% of individuals turning 65 between 2015 and 2019 will spend more than $250,000 on long-term care during their lifetimes.
• PwC research from 2017 estimates that the current average lifetime cost of long-term care is $172,000 per person.
• The estimated lifetime cost of care for someone with dementia is $341,840.
• Annual claims on long-term care insurance policies were $9.2 billion in 2017.
• Average annual premium for long-term care policies being sold was $2,772 in 2015 (as contrasted with the average $82,000 per year cost).
• AARP states that as of 2018 by the time you reach 65, chances are about 50-50 that you’ll require paid long-term care someday and could spend $140,000 on average out of pocket.
• Some insurance companies have combined life insurance with long-term care insurance so that consumers can benefit in one form or another.  While features are changing as the product evolves, the long-term care benefit is generally a percentage of the life insurance benefit.

Options to pay for long-term care

There are three principal options to pay for long-term care:

• Personal funds, or out-of-pocket resources, like savings, pensions, equities, retirement income or selling home;
• Government health insurance: Medicare doesn’t pay for long term care expenses and Medicaid only pays after you have spent down enough assets to qualify.
• Private financing, like Long-Term Care Insurance.

What are the advantages to long-term care insurance?

1. Maintain independence. Paying out-of-pocket for long-term care will dissolve the assets you accumulated from your financial success. Without your assets, you will not be in control of paying for your own care and will be forfeiting your savings, your income, and perhaps even your home. Government coverage through Medicaid will likely not fulfill the care needs you have because of its limitations. While many people want to receive care at home, Medicaid does not cover it. A long-term care insurance policy provides funds for your care, whether in a facility or at home, and you keep your personal assets.
2. Protect your spouse. Costs for care between a couples will most likely be covered by combined income and assets. You may not know how a long necessary care may last, which means resources might have to be spent for an unexpected amount of time. If this time is protracted, your spouse might not have enough financial resources for their future needs. Long-term care policies prepare for this, and often offer plans that work between couples. Some hybrid insurance products will even leave funds to beneficiaries after a spouse dies.
3. Eliminate family caregiver burn-out. While a family caregiver may be “free of charge,” the toll that caregiving takes on their health may not be worth the benefit. Caregivers, who often work around the clock to support elderly loved ones, don’t have the time and energy to take care of themselves and can also become ill, sacrificing their own income and quality of life. A long-term care insurance policy will provide compensation for professional caregivers to handle the situation and give your family members the rest and personal time that they need.
4. Keep your assets intact. When you have assets that you want to leave to your spouse or family members, whether a home, savings, or other valuables, long-term care insurance can help you avoid spending them all to cover long-term care expenses. Preserving your assets through long-term care insurance, rather than covering expenses out-of-pocket, will help you secure the care you need, as well as the safety of your family in the future.

What you should do now

Given all the information above, what should you do now? You should take the time to consider your personal situation and how long-term care costs or insurance would impact you and your family. Then shop around for the best insurance coverage and rates that fit your personal situation. The earlier that you buy your policy, the more affordable long-term care insurance will be for you.

Get more information about long term care programs.