Updated: Jan 9, 2019
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Long-Term Care Planning: Make a Safety Net for You and Your Loved Ones
What will you do if you face a lengthy recovery from an illness or injury? When faced with the question of long-term care, many people simple shrug it off. It’s not a prospect anyone looks forward to, nor do they want to believe it could happen to them. The reality is most of us require care at some point in our lives. Making a plan to ensure your needs are met means future security for you and your family.
Long-term care isn’t an issue to take lightly. In fact, according to a story in the Times Union, over half of Americans pay for long-term care out of pocket. Adding in those who receive in-home care, the number rises to around 70 percent. Care is expensive and can quickly drain a nest egg, with an average nursing home stay hitting $97,000 in 2017. Many Americans resort to a reverse mortgage to pay for care, but there are pros and cons to that decision, and one should carefully factor both sides of the equation. It’s quick access to cash, but has ramifications regarding your estate. Those considering the option should do their research and discuss particulars with a financial counselor.
What about Medicare and Medicaid?
If you are like many Americans, you believe Medicare will take care of you should a need for long-term care arise. However, the majority of long-term care includes extended nursing home stays or custodial care, and Medicare covers neither. Medicaid is designed to help people with low incomes, so you must first meet financial qualifications for assistance. Many seniors must undergo what is referred to as a Medicaid spend down to deplete assets, and thereby their estate, in order to receive help.
Much is made these days about long-term care insurance, and it’s a good option for many people. Some experts suggest it’s a best fit if your assets tally between $200,000 and $2 million. However premiums tend to be high, and rise with the age of the applicant. There are other insurance-related options for covering long-term care costs also worthy of consideration. Hybrid insurance plans are life insurance plans combined with a long-term care plan, basically allowing you to tap into the death benefit to pay for long-term care expenses. Since you are using funds prior to death, it depletes the benefit your loved ones receive later.
Another option is a long-term care rider on a life insurance policy, although payment of the benefit lowers the death benefit as well as the cash value of the policy. Forbes points out that veterans and their surviving spouses also have their own option, since long-term care is included in benefits through the Veterans Administration.
Some people choose to self-fund care, also referred to as “self-insure,” which is a viable choice if you are very wealthy. An annuity plan is a good option for many people with a more average net worth. In this case, you make a lump-sum deposit that earns interest, and depending on your particular plan, you can start receiving distributions toward long-term care after a certain age. Because an annuity plan is not life insurance, there is no medical exam, making it an attractive option for those with health concerns.
If you have a health savings account (HSA), you can also use those funds toward qualifying, medical-related expenses. This is a nice option for seniors, since they can withdraw funds from their health savings account tax-free. And the older you are, the more you can withdraw without paying taxes.
Planning means security
Look to the future for your sake and for the sake of those you love. Weigh your options to find a fitting way to meet long-term care needs. Good planning provides a safety net for future financial security and well-being.
About the author:
Hazel Bridges is the creator of AgingWellness.org, a website that aims to provide health and wellness resources for aging seniors. She’s a breast cancer survivor. She challenges herself to live life to the fullest and inspire others to do so as well.