Don’t saddle yourself with a huge bill in your golden years
During your golden years, many financial experts say that you will need less money in retirement than you do during your working years. The assumption is that many of the large ticket items will be paid for by then. But, one of the largest expenses in later life hits when you may have the least ability to pay for it: elder care.
People are living longer, often making retirement decades long. But much of that time is not spent in a healthy state. The reality is that in America, someone turning 65 today has nearly a 70% chance of needing some type of long-term care in their remaining years to assist with performing everyday tasks like eating or bathing
If it turns out that you or your loved one needs help in old age, will you have the expenses figured into your retirement plan so you can age gracefully with the care you need?
Long-term care insurance
If you plan ahead to pay for Long-term Care Insurance (LTC), you take a huge burden off your family and/or spouse. You won’t suck all of their resources – energy, time, and money – to provide the ongoing care you need. You will have hired trained professionals for your care, providing your loved ones and yourself with the best possible solution.
Long-term care insurance is sold as a policy specifically for your LTC, or as a long-term care rider attached to a life insurance policy. You can choose to pay premiums that will cover you until you die or for a specified time period. According to the Department of Health and Human Services, the average use of long-term care services is three years.
Different Levels of Care and Costs
There are different levels of care available for different needs. You could be fine with In-home care, where a helper assists you with housekeeping tasks, or a qualified nurse provides healthcare for an appropriate hourly wage.
The next level is to live in an Assisted Living facility, with a full staff to provide the care you need. The median cost of assisted living facilities is $148 per day, which equates to $4,500 per month, or $54,000 per year. It’s important to note that these figures don’t take into account specialized care, such as memory care, or considerations for disabilities.
Nursing Home care, also called skilled-nursing care or convalescent care, provides seniors around-the-clock, 24-hour medical care. The monthly cost of a semiprivate room in a nursing home is expected to reach over $10,000 per month by 2030. In 2021, the median cost for a private room in a nursing home was $108,405 annually, according to Genworth, a leader in LTC insurance. You can estimate the costs of different levels of long-term care in your area using Genworth’s Cost of Care calculator.
Americans at risk
Americans may think that Medicare covers their long-term care needs during their golden years. Unfortunately, there are many conditions you must meet, including allowances on the number of days, co-pays up to $200 per day, and ultimately, coverage ends completely after 100 days.
Medicaid is an excellent option for low-income older adults. Often, this program covers 100% of care costs, but some people are required to pay co-pays. For low-income seniors who qualify for Medicaid, this is the best choice for nursing care coverage.
It’s common to pay for nursing home care with your own resources at first, then move to Medicare or another funding source later. The main benefit of paying privately is flexibility. With Medicare and other taxpayer-subsidized programs, seniors have fewer choices of facilities because they can limit the number of publicly-funded residents. So, it’s important to know the accepted payment setups before deciding to move into a given facility.
Sources of private funds could be savings, annuities, or money from cashing out IRAs and other investments. People also borrow from life insurance policies, sell their homes, and get reverse mortgages.
Expats retiring to other countries
In many countries, long-term care benefits are part of the universal health coverage, so residents don’t have to save separately to cover this cost. The cost of care in many places abroad is much lower than in the U.S., so some people who would require LTC insurance if they stayed in the U.S. can get by without it abroad.
Americans with insurance policies with LTC riders, or who have separate LTC insurance must check their policies before planning to age overseas.
Many long-term-care policies offer some coverage for care overseas, but it’s often less generous — in terms of the dollar amount, the period covered, or both — than coverage for care in the United States. That’s partly because some insurers prefer not to deal with international claims, since medical records may not be in English. However, some policies may offer benefits in English-speaking nations like Canada and England but exclude them elsewhere.
One reason for these limitations on LTC insurance portability abroad is that private health insurance, including LTC insurance, is a rather uniquely American phenomenon. American insurers often have no mechanism by which they could pay benefits to nursing homes and other care providers.
Genworth, one of the largest sellers of long-term-care policies, typically pays half of the maximum daily or monthly benefit for care in a facility overseas. John Hancock often pays international benefits at 100 percent but limits coverage to a maximum of one year. MedAmerica, offers policies that pay full benefits overseas, but they may carry higher premiums so you must weigh your needs carefully.
Do I already have LTC insurance?
To find out if your existing life insurance policy has a LTC component or rider, first check the section titled ‘Exclusions and Limitations’. There may also be a section on International Benefits or Out of Country Benefits. The two most important questions are how much coverage is provided and for how long during those golden years.
The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up-to-date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not accept any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.
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