Why You Should Consider Long Term Care Insurance in Your Retirement Planning

If you haven’t already done so, now is an excellent time to consider adding long term care insurance to your retirement portfolio. Because uninsured long term care expenses can pose a significant risk to the assets you’ve worked a lifetime to accumulate, long term care insurance should be considered as part of a complete financial plan.
 
As former Senator told the United States Senate Special Committee on Aging, “Although the need for health insurance to cover a patient’s medical expenses in case of catastrophic illness is widely recognized, few people are insured against the costs of providing long term support services for that same person. This lack of insurance coverage jeopardizes the financial security of families and diminishes the economic security of the country.”
 
The likelihood that you may need long term care is significant.  Some 70% of Americans who reach the age of 70 can expect to utilize some type of long-term care during the remainder of their lives.  And while long term care includes a broad range of services, from in-home care to nursing home care, each comes at a cost.  Those costs could be substantial, and could have a significant adverse effect on your retirement portfolio.
 
Why? Most forms of health insurance focus on medical expenses, not the custodial care and nonmedical expenses associated with long term care. Medicare only covers nursing home care after a related three-day inpatient hospital stay and even then for only 20 days before a daily co-payment is assessed and Medicare only covers a total of 100 days.

Medicaid doesn’t kick in until one has spent down a significant portion of their assets (spend-down to $2,000*).  Therefore, if either you or your spouse needs long term care, you may have to pay for that care out of your accumulated assets … unless you have long term care insurance.

genworth-nursing-cost-2016The average cost of a private room in a nursing home met or exceeded $80,000 annually.  If one partner needs such care, the cost could quickly and substantially erode the assets acquired over a lifetime.
 
Let’s use a hypothetical couple living off the interest of $500,000 of invested assets to illustrate how serious an impact long term care expenses could have.

For the sake of this discussion, assume the couples’ investments are earning approximately eight percent annually, generating about $40,000 per year in income.  Let’s also presume this couple needs all of this income to support them while they’re living together in their home.
 
Based on an $80,000 annual cost for nursing home care, it may appear that this couple has enough for a little more than six years of care. However, that basic calculation does not consider the living expenses of the spouse who remains in the community.  

If this couple is using all of their investment income to provide for their living expenses, they will soon need to start withdrawing from the principle for a portion of those living expenses as well as for the long term care expenses of the partner who needs care.
 
In circumstances like these, it’s easy to see how the assets accumulated over a lifetime could soon be completely exhausted.
 
Long term care insurance can help provide the funds to pay for the care you may need, while simultaneously protecting the assets you’ve worked a lifetime to accumulate. Long term care insurance may also help preserve financial independence, choice, and dignity, and those can be priceless.
 
It’s never too early to consider insurance because your health can change at any time, meaning you may be uninsurable and end up paying out-of-pocket.

The Partnership Asset Protection program is available in most states. This will protect your home and assets to the limit as was paid by a qualified policy.

Some people have too many assets to benefit from the Partnership. They may prefer an annuity or life insurance with a long term care rider. You can use an existing whole/universal life policy or existing annuity to fund a new policy with long term care coverage. The Pension Protection Act allows this transfer without having to pay capital gains.

Feel free to contact us for more information or for an updated quote.

Be Prepared: Get Long Term Care Insurance Quotes


.* States can differ on spend-down.

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Millennials are most aware about long term care insurance

Only 20% of Americans have taken steps towards financing long term care, including even researching the costs. Millennials, who have long known that Social Security may not exist by the time they retire, are the generation most likely to have taken action on long term care insurance, according to Genworth Life Insurance Company, a long term care insurer since 1974.

Of people age 65 and older, 70% will need long term care at some point. However, only 52% of baby boomers believe they will need care. Millennials and members of Generation X are more realistic; 64% of Millennials (age 34 and younger) and 65% of Generation X (age 35-50) expect they may need long term care in the future.

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Most Americans (66%) mistakenly believe government programs will cover the costs of long term care. But Medicare only pays for skilled services or rehabilitative care, not for non-skilled assistance with activities of daily living, which is the bulk of long term care services.

Here are the 2016 national average costs for long term care in the United States (costs vary by state): $225/day or $6,844/month for a semi-private room in a nursing home; $253/day or $7,698/month for a private room in a nursing home; $119/day or $3,628/month for a one-bedroom space in an assisted living facility; $20.50/hour for a health aide; $20/hour for homemaker services; $68/day in an adult day health care center.

For those who are not prepared financially to handle their care costs, the burden will fall on their families and communities. It’s important for people who are growing older to talk with their families about their possible future needs and develop a plan — including how they will pay for care if needed.

Other facts the Genworth study showed Americans were uninformed about: 52% did not know that long term care insurance can cover help in their homes; 61% did not know that long term care can be personalized and that the insurer can help them find good care providers.

Insurers say people are never too young to begin planning for long term care costs, which can be a major expense and quickly use up retirement savings. To find out about long term care insurance, see the Guide To Long Term Care

Long Term Care Insurance Quote


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Everyone should do some estate planning.

Everyone—regardless of how small their wealth—should do at least some estate planning. 

Some things to consider include:

• A will: This is the most basic of estate-planning documents, yet a Caring.com survey this year showed that more than half of Americans don’t have a will. That’s surprising and troubling all at the same time. A will can provide certainty and clarity and eliminate  the grey areas when property is moving from one generation to the next. Don’t just assume everything will end up with the people you want it to if you fail to leave specific instructions.

• A trust: Not everyone needs a trust, but it often makes sense. Basically, a trust allows you to control your assets from the grave. You can set certain restrictions, which is especially helpful if your kids are young or they don’t really manage money well. That way you may be able to keep them from blowing their inheritance all at once. For example, a restriction might be that they don’t receive the money until they earn a college degree.

• Power of attorney: It’s important to assign someone power of attorney so that if you become incapacitated that person can speak on your behalf and sign important documents. You can also have a living will to outline your wishes, which could help your family make tough decisions about your healthcare.

If you don’t plan for your long term care who will?

Long Term Care Insurance Quote


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