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Why Retirees Have to Talk About Long-Term Care

We all avoid certain tasks in our lives, whether it's something small like our gym schedule, or something bigger, like spring cleaning. But one thing that should never be avoided is making a long-term care plan. Many of us know someone who had to spend all of their savings paying for care in a facility rather than sunning themselves on a Florida beach vacation.

The Importance of Having a Long-Term Care Plan

Even if you think it couldn't happen to you, you should still have a plan. Take a look at these numbers, according to a Morningstar report:

  • 15 million Americans are expected to have a long-term care need by 2050.
  • 52.3% of individuals turning age 65 are expected to have a long-term care illness during their lifetime.
  • 57% of women over age 65 will have a long-term care need during their lifetime.

These numbers mean out of every two people 65 and older, one of them is going to be dealing with a long-term care issue. For those who encounter a long-term care issue, they’re going to likely be dealing with it for at least two years, if not more. (For related reading, see: Long-Term Care Expenses: What You Should Know.)

Long-term care costs also aren’t limited to just a nursing home. They can also include:

  • Assisted living facilities, where you can live independently but have a daily aide
  • In-home care (physical therapist, nurse, personal caregivers)
  • Hospice
  • Home modifications to make a home easier to use if wheelchair-bound or disabled
  • Adult daycare facilities

Prepare for Long-Term Care

Statistically speaking, it’s far more likely it will rather than won’t happen to you. For a majority of Americans, the question is no longer, “Do I need a long-term care plan?” With 10,000 baby boomers turning 65 every day between now and 2030, and health-care concerns ramping up each year, the question to ask is, “What can I do for my long-term care?” Acknowledge the problem is real and act on it.

Get out your will and trust documents to see if you have a properly drafted power of attorney (POA). The POA can help with many things related to long-term care. If you’re in a situation where you’ve been hospitalized and are unable to give verbal confirmation of your wishes, doctors will turn to your POA to see who can speak on your behalf. Without a properly drafted copy, you could be waiting on a medical procedure for days — or even worse, have someone put in charge of your care who doesn’t know what you want.

Funding Long-Term Care

Funding long-term care, whether it is in a nursing home, hospice, assisted living or other type of situation, is not easy. You should determine if self-funding is an option:

  • 15.2% of individuals turning age 65 between 2015-19 will spend more than $250,000 on long-term care in their lifetime.
  • Seniors in Louisville can expect to pay, on average, right around the national median for nursing home care. In 2017, nursing home residents paid $101,472 annually for private residences and $83,952 for semi-private rooms.

Most of us do not have a spare $250,000 just lying around somewhere that we can afford to lose. Costs for long-term care add up quickly, and once a medical issue occurs, the bills just keep coming. It’s usually safer to allow for some type of long-term care insurance protection to transfer the risk to an insurance company.

Long-term care insurance companies have seen an increase in claims by over 450% between 2000 and 2017. With so many individuals using policy benefits, you can bet the companies are getting a premium for the coverage, so it’s not going to be cheap, but better than paying out $250,000 in just a couple of years.

Another potential option would be a life insurance policy with a long-term care benefit rider. Most will allow you to use the death benefit if you need it while you are alive. If you never need the coverage, your family will receive a tax-free death benefit when you pass.

Planning for Long-Term Care Shouldn't be Optional

Planning is critical to all who retire. Ask questions, even the uncomfortable ones you don’t want to know the answer to. You may be able to create a plan without using any insurance. Perhaps by working with your attorney, you can set things in motion so if you need to go to a facility, Medicaid could pick up your cost. Ask what you can do in your will or trust to minimize the effect of long-term care on your estate. If you want insurance coverage, look for a fiduciary advisor who can work alongside you to select a plan that’s in your best interest and meets your goals.

(For more from this author, see: Why Annuities Might Be Right for You.)


Disclosure: Investment Advisory Services are offered through Mercurio Wealth Advisors, a Registered Investment Adviser.