Retirement is an exciting new phase of life, and you may feel you will have 15, 20, maybe 30 years to look forward to. Hopefully, you have savings to cover housing, living expenses, and modest discretionary spending.
In our dreams, few of us imagine ill health or long-term care needs. A private room in a nursing home runs about $129,575 a year. In-home help with everyday needs such as bathing and dressing averages around $80,000 a year. Do you have a plan for that?
One way to cover costs is with long-term care insurance. LTC insurance covers services like home care, assisted living, and help with daily tasks. Rates are typically lowest if you buy in your 50s or early 60s, couples often qualify for discounts, and premiums may even be tax-deductible.
The unplanned costs of a long life
Seventy percent of adults who reach 65 will develop a serious need for LTC before they die. Medicare does not generally pay for the custodial LTC at the center of this risk, the ongoing help with bathing, dressing or eating. Many people assume it does, and find out otherwise at the worst possible time.
Much of the help older adults need is provided unpaid by a spouse, relatives or friends. About 48% of people who reach 65 eventually receive some paid care. Twenty-four percent receive more than two years of paid care.
Paid-care spells may be relatively short, but a minority stretch for years, and the lifetime bill for that group can run past $250,000. LTC insurance can cover multiyear care periods that could drain a portfolio built for an independent retirement.
Who might benefit from long-term care insurance
Medicaid can cover long-term services and supports for those who meet their state’s financial and care-need requirements. However, if you are in your 50s or early 60s, still in good health, with savings large enough that a multiyear care bill would wreck them but not so large that you could pay cash and move on, insurance may be a good call.
Married couples have to plan for two retirements, making LTC planning even more relevant. A long care spell for one spouse can eat into the assets the other still needs to live on, though federal spousal-impoverishment rules do let the healthy spouse keep a portion of the couple’s income and savings.
The window that closes
Long-term care insurance rewards buying early. Premiums generally rise with the age at which you apply, and waiting also raises the chance that a health problem makes coverage more expensive or puts it out of reach.
Wait too long, and the door can close entirely. Nearly half of applicants aged 70 to 74 are turned down, and certain serious diagnoses or cognitive impairment can make coverage unavailable. The health scare that convinces you to buy is often the same event that makes you uninsurable. The coverage has to be in place before you have a reason to want it.
A little planning now can spare your family a difficult financial situation later. See a list of the best LTC insurance companies. It takes two minutes.
The risk is there
Long-term care is not a remote risk you are hedging against. Needing some form of long-term care is common with a long life, and the planning window starts years before the need shows up.
The odds of needing some help are high enough that ignoring the possibility is a financial decision in itself. Bear in mind that at 85, your care will either be funded by a policy you planned for or whatever you have left in dwindling savings.
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