Long-term care refers to specialized, ongoing services and support that help you live as independently as possible on a daily basis. With healthier lifestyles and longer lifespans, you’re likely to need some level of long-term care during your retirement years. However, long-term care may also be necessary at other times of life, following injury or illness.
A long-term care insurance policy can help cover the costs associated with long-term care. Increasing premiums and changing requirements - including upcoming changes that are of particular importance to single women - mean that now might be the best time to incorporate a long-term care policy into your wealth planning. (For related reading, see: Long-Term Care Insurance: Who Needs It?)
Why You Should Plan for Long-Term Care
Long-term care is like many aspects of life: you may not need it but you should plan for it nonetheless, especially when it comes to your finances. The cost of long-term care varies depending upon factors such as where you live, the level of care you need and the duration. However, 2017 is the first year in which average costs for skilled nursing care in a private or semi-private setting have exceeded $100,000. Without a long-term care insurance policy, your savings must be sufficient to cover these costs.
Doesn't Medicare Cover Long-Term Care?
Like many other retirement myths, you may be surprised to learn that Medicare, the federal health insurance program for older Americans, provides only limited coverage for long-term care services such as skilled nursing care or physical therapy. Furthermore, while it offers some home healthcare benefits, it doesn't cover custodial care of the type you may need as you age.
What About Medicaid?
Medicaid, often confused with Medicare, does typically cover some long-term care expenses, including nursing home care. However, it only provides benefits to individuals with limited income and assets. In addition, eligibility and benefits under Medicaid may change significantly in the future, subject to healthcare reforms.
Can't I Pay for Long-Term Care Out of Pocket?
Using your income, savings, investments and other assets to fund long-term care costs allows maximum control over where and how you receive care. However, you may struggle to sustain costs of care over an extended period, if needed. Furthermore, your care needs could infringe upon a healthy spouse’s financial well being. (For related reading, see: Taking the Surprise Out of Long-Term Care.)
Long-Term Care Insurance
Long-term care insurance protects you against the possibility that your future care costs may exceed what you can afford. In exchange for a monthly or annual premium payment, the insurance company agrees to cover some of your future long-term care costs, and also guarantees access to a range of care options.
How Much Does Long-Term Care Insurance Cost?
The cost of a long-term care policy depends on a number of factors. Here are some of the key considerations used to calculate your policy premiums:
- Your Age: In general, the younger you are when you purchase a policy, the lower your premium will be.
- Elimination Period: Consider this your deductible. It’s the number of days you must pay for yourself before the policy will begin covering your long-term care costs.
- Benefit Amount: This refers to the maximum amount your policy will pay for each day of care that you need. It typically ranges from $50 to $350.
- Benefit Period: This is the total length of time that your policy will pay benefits e.g., two years, four years, lifetime, etc.
- Level of Care: There are three levels of long-term care available:
- Custodial Care: This level of care, provided by family caregivers, aides or home health workers, assists with "activities of daily living" e.g., bathing, eating, and dressing.
- Intermediate Care: This is provided by professional healthcare providers but less frequently than skilled care.
- Skilled Care: This is the level of greatest need - round-the-clock care from professional healthcare providers such as nurses, therapists or aides under a doctor's supervision.
- Long-Term Care Setting: Many policies cover long-term care in a variety of settings, including adult day care centers, assisted living facilities, nursing homes and most commonly, at home.
- Inflation Protection: Inflation protection is an optional feature, available at additional cost. It automatically increases your benefit by a certain percentage each year, helping your coverage to keep pace with rising prices and the cost of long-term care.
Why Get a Long-Term Care Policy Now?
Planning ahead for long-term care costs allows for more flexibility in the future. As policy pricing is dependent upon age, the costs of obtaining coverage become more expensive every year. Furthermore, upcoming changes mean that long-term care insurance policies will soon become gender specific. For women, who live longer and more often make long-term care insurance claims, this means that prices are expected to increase substantially in the coming months. This makes choosing your long-term care insurance a time-sensitive decision if you don’t already have coverage. If you’re considering a long-term care policy, especially if you're a single woman, we recommend that you take action now. (For more, see: Medicaid vs. Long-Term Care Insurance.)
The information contained herein is obtained from sources believed to be reliable, but its accuracy or completeness is not guaranteed. This article is for informational purposes only. The views expressed are those of SageVest Wealth Management and should not be construed as investment advice. All expressions of opinions are subject to change and past performance is no guarantee of future results. SageVest Wealth Management does not render legal, tax, or accounting services. Accordingly, you, your attorneys and your accountants are ultimately responsible for determining the legal, tax and accounting consequences of any suggestions offered herein.
In accordance with IRS CIRCULAR 230, we inform you that any U.S. Federal tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used by a taxpayer, for the purpose of (a) avoiding penalties under the Internal Revenue Code or that may otherwise be imposed on the taxpayer by any government taxing authority or agency, or (b) promoting, marketing or recommending to another party any transaction or matter addressed herein.
The provision of a link to any third party website does not mean that SageVest endorses that website. If you visit any website via a link provided here, you do so at your own risk and indemnify SageVest from any loss or damage incurred.