No one wants to discuss it.
No one wants to save for it.
But most admit they may need some sort of care.
How do you plan for it?
Let’s address four questions related to long-term care.
What is long-term care (“LTC”)?
Definition: medical and non-medical care provided to individuals unable to perform basic activities of daily living such as dressing or bathing.
How much does LTC cost?
The cost varies depending on:
- The level of LTC (desired or required),
- The location of the LTC, and
- The duration of LTC.
The national annual averages in today’s dollars are on the left, with a projected cost 30 years from today (inflated at 5%) on the right:
- Assisted living – $64,000 / $264,000
- In-home care – $68,000 / $283,000
- Nursing home – $117,000 / $481,000
While these are “averages,” the cost varies quite a bit depending on where you live!
How can you protect yourself?
Long-term care is one of the most complex risks to protect against because of:
- The uncertainty of your health, and
- ALL of the options are expensive.
Here are three ways to think about it:
LTC Insurance – Consider this comparable to term life insurance but for LTC.
You pay annual premiums to secure a specific monthly benefit should you require long-term care. If you don’t use it, you lose it. These policies are expensive and narrow in scope due to significant changes in how insurance companies now price these policies.
LTC Combination Insurance (“combo”) – Combo policies are more prevalent as of late due to the flexibility of these policies, which come in two flavors:
- Hybrid LTC – This provides long-term care benefits and a modest death benefit. The LTC benefits often contain an inflation-protection feature.
- Life Insurance with LTC riders – The focus here is on life insurance with specific LTC riders that kick in should you need it.
Self-Insure – Forgo the above options and use your accumulated assets to fund associated expenses.
When should you start thinking about LTC?
It’s never too early to incorporate long-term care into your financial planning. However, your views of what this looks like for you may evolve. Some questions to consider include:
- Do you want in-home care, or are you okay with a facility?
- Do you want to rely on family members as caregivers?
- What expenses go away if you move into a facility (i.e., property taxes, travel, etc.)?
Securing LTC insurance early on may result in making “too many” payments, while waiting too long can result in significantly higher premiums, potentially pricing you out of the market.
Perhaps the best approach to long-term care planning is prevention. Consider incorporating a wellness line item into your budget, but instead of classifying it as an expense, view it as an investment. Check out our blog, Health & Wealth, which discusses the parallels between financial planning vs. wealth planning, for more on this concept!
Let us know if you need help understanding these long-term care concepts. Feel free to book some time with us here.
Please consult with your financial advisor and/or tax professional to determine the suitability of these strategies. All views, expressions, and opinions in this communication are subject to change. This communication is not an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services.