Do You Have a Plan to Pay for Long-Term Care?

July 12, 2018

What’s the most difficult challenge you’ll face in retirement? It could be long-term care. According to the U.S. Department of Health and Human Services, today’s 65-year-olds have a 70 percent chance of needing long-term care during retirement. The same study found that care is usually needed for a few years, and 20 percent of those who need care require it for more than five years.1

Long-term care is often a result of cognitive disorders such as Alzheimer’s, Parkinson’s or dementia. Care is often provided in either a facility or one’s home, and it usually involves assistance with day-to-day activities like eating, mobility, bathing and more.

As you might expect, long-term care can be costly. If you don’t have a plan in place, you may struggle to get the care you need. Below are three strategies you can use to fund your future long-term care needs. A financial professional can help you develop and implement a plan.

Retirement Savings

You always have the option of paying for your long-term care directly out of your retirement assets. However, this strategy could drain your savings in a very short period of time. In fact, if you need care for several years, it may be impossible to fully pay for the care with your own assets.

According to a recent Genworth study, the average monthly cost for an assisted living facility is $3,750. In-home care isn’t much cheaper. The average monthly cost for an in-home aide is more than $4,000.2

Consider how these costs could add up over several months or even years. It’s easy to see how this strategy may be impractical. If you’re married, you may spend all your assets on your care and leave your surviving spouse with few resources after you pass away. It may be wise to consider other funding options.

Government Programs

Think you can rely on Medicare to cover your long-term care costs? Think again. Medicare is a valuable resource, but it doesn’t pay for all health care costs. It may cover some temporary care costs if the care is related to a covered medical procedure. However, Medicare won’t cover ongoing costs for aid with basic living activities.

Medicaid does cover long-term care costs, but that protection comes with a catch. To be eligible for Medicaid, you must have little income and few assets. Many people spend down their own assets on long-term care before they qualify for Medicaid coverage. While you may use Medicaid at some point, you may not want to count on it as your primary funding source.

Long-Term Care Insurance

Long-term care insurance is a popular strategy because it’s flexible. You can find a policy that fits your precise needs and budget. With a long-term care insurance policy, you pay premiums to an insurance company and, in return, it pays for some or all of your long-term care costs when the need arises. The terms of the coverage depend on your specific policy.

Most policies cover care provided either in the home or in a facility. Some also cover home modifications for things such as wheelchairs, lifts or safety equipment. In many ways, long-term care insurance can help you stay in your home rather than move into a facility.

Ready to develop your long-term care funding strategy? Let’s talk about it. Contact us today at Grand Canyon Planning Associates. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.