“Should I buy long-term care insurance?” I’m often asked this question at my workshops and presentations, and it’s an important issue to consider as you approach and enter retirement. Unfortunately, there’s no perfect simple solution to address the threat of long-term care expenses. Most people will need to pick the “least bad” solution given their goals and circumstances.
Many of us have dealt with long-term care for our parents and have experienced the considerable expense and the disruption of their family’s lives. If you’ve lived through this, consider it as a wake-up call for your own experience in a few decades.
Addressing the threat of potentially ruinous long-term care expenses could be one of the most difficult challenges you’ll face when planning for your retirement years. And while long-term care insurance may not be the answer for everybody, I strongly advocate that everybody at least needs a strategy to address the threat of high long-term care expenses. Let’s look at some considerations for developing such a strategy.
What Is Long-Term Care?
Long-term care provides help when you can’t complete ordinary, activities of daily living such as bathing, using the bathroom, safely moving around, preparing your own meals, or following medical directives, including taking prescription drugs.
There are two primary reasons you may need long-term care in your future. The first reason is poor health. If you can’t take care of yourself, you’ll need some help. The conditions that typically require long-term care include Alzheimer’s or dementia, advanced osteoporosis, fractures resulting from severe falls, or simple frailty of old age.
These conditions often take time to manifest themselves; there’s no warning light that comes on saying it’s time to obtain long-term care. Usually there’s a long period of deterioration accompanied by agonizing debate among family members regarding the need for long-term care.
The second contributing factor is the lack of family or friends who can help take care of you. In our grandparents’ day, families weren’t dispersed across the country, and family members often took care of their frail relatives. These days, many people don’t have family nearby to help out. In this case, paid long-term care may be the only solution for people whose health has deteriorated and have no family nearby.
Types Of Long-Term Care
There are really only two ways to receive care—in your home or in a facility. In-home care can be unpaid through family and friends, or it can be professional paid care. Facilities where you could get care include assisted living or skilled nursing facilities, or nursing homes.
While many people express the desire to age at home, often the circumstances don’t make this a realistic solution. No matter what your future holds, you’ll want to learn about the costs of both paid in-home care and facilities, so that you understand the potential costs.
Most Likely Nobody Else Will Pay For Your Long-Term Care
It’s a common misconception that Medicare and medical insurance policies will pay for long-term care expenses. This misconception stems from the fact that these programs pay limited benefits for rehabilitation and recovery at a skilled nursing facility immediately following a stay at a hospital. However, they won’t pay for the care needed in the more common situation where you decline slowly and eventually need help with daily living activities, without a preceding stay at a hospital.
Another potential misperception is that Medicaid will pay for long-term care, but unfortunately most people can’t count on that. Usually, to be eligible for Medicaid to pay for long-term care expenses, you need to demonstrate that you have very limited financial resources. Also, Medicaid is on the chopping block for the Trump administration’s cost-cutting efforts, and it looks likely that future benefits will be reduced significantly.
What Is The Risk Of Needing Long-Term Care?
It’s common to see scary statistics that go something like this:
- 70% of people turning age 65 will develop a severe long-term care need in their lifetimes.
- Assisted living facilities and nursing homes can cost more than $100,000 per year.
Both statistics are true and might convince you that you need to buy long-term care insurance. However, many people needing long-term care only need limited help at the end of their lives. One report offers less scary statistics, noting that the average cost of long-term care per person could be a little more than $7,000, and only 5% of older Americans incur long stays costing $47,000 or more.
However, to be prepared, you should consider the likelihood and consequences to your finances and family if you will need expensive care for a period longer than just a few months.
What Are The Available Strategies To Address The Threat Of Long-Term Care?
One bit of good news is, the conditions causing the need for long-term care can be delayed, mitigated, or even prevented altogether by adopting a healthy lifestyle. This means taking care of your health through exercising, eating well, managing stress, getting significant sleep, and not abusing drugs or alcohol.
You’ll also want to nurture your relationships with family and friends who might be able to help out.
Financial strategies can include buying long-term care insurance or maintaining financial assets that can be tapped if you need to pay for care.
As you can see, you’ll want to consider your own assets, goals, and circumstances to help you decide on an appropriate strategy for you and your family. But don’t put off thinking about long-term care expenses when you’re in your fifties, sixties or seventies, since the threat seems so far in the future.
The fact is, not only can long-term care be very expensive, it can place an emotional and exhausting burden on your spouse and/or children. You can help minimize this burden by developing a strategy before you need it and by sharing your preferences with your family. It will help you relax and enjoy your retirement years.