AUGUST 17, 2017
The encouraging news is that Americans are living longer, with life expectancy well into the 80s. A 55-year-old woman, for instance, can expect to live to 87½. However, says Karen DeRose, president of DeRose Financial Planning Group, "The longer we live, the more likely we will one day need long-term care."
The U.S. Department of Health and Human Services predicts that one out of two Americans turning 65 will require long-term care services at some point in their lives. "You need to plan as if this will be you," adds DeRose. This article discusses some of the factors to consider when evaluating long-term care options. You should consult a legal and/or financial professional to determine an approach to address your needs.
Consider this: The average annual price of a private room in a nursing home is now more than $92,000, and the cost of round-the-clock home health aides tops $170,000 a year, according to long-term care insurance company Genworth’s latest Cost of Care Survey. And Medicare generally doesn’t cover these services.
The potential costs could be staggering, depleting even a sizable nest egg. So it’s important to get started before you might need help. The question is, should you buy insurance or simply save money toward covering future long-term care costs on your own?
Here are four options to consider.
With a target of at least $2 million in retirement savings, you could be able to "self-insure." Here’s how you can get started:
2. Long-term Care Insurance
Long-term care insurance is often recommended for people who have less than $2 million in assets, but more than $300,000. (Those with less than $300,000 might be eligible for Medicaid, which covers long-term care for those with minimal assets and inadequate income of their own.)
This insurance can help pay for such future needs as assisted living or home health care. You can choose a policy that will reimburse you a predetermined amount of money for a period of time, generally two to five years.
You might consider buying a long-term care insurance policy when you're in your 40s or 50s, because premiums tend to increase as you get older. Put it off and you could be denied coverage completely due to your health.
3. Hybrid Policies
Hybrids offer long-term care benefits in combination with life insurance or an annuity. If you were to need long-term care at some point in your life, the policy would cover it. However, if you were to die the policy would pay a death benefit, or the value of the annuity, to your beneficiaries.
"Unlike traditional long-term care policies, these are not ‘use it or lose it,'" emphasizes DeRose.
4. Talk to an Elder Law Attorney About Medicaid Planning
Medicaid generally covers long-term care costs only after you’ve exhausted most of your savings. With proper planning, you could preserve some of your assets for your spouse and your heirs but still qualify for Medicaid coverage.
Assets can be placed in a Medicaid trust and protected for five years.
Some things to keep in mind:
You've worked too hard to build that retirement nest egg, only to see it wiped out by unforeseen health costs.
While it might be difficult to think about a time when you might need help caring for yourself, having a plan could lower the financial and emotional stress for you and your family.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and not to be comprehensive or to provide advice.