Long-Term Care (LTC) should be part of your strategy whether it’s needed now or in decades.
One of our biggest financial risks late in life is the need for long-term care in a nursing home or in your own home. The average of a private room in a nursing home is more than $100,000 +/yr. (Genworth’s recent LTC survey). In home care in Hampton Roods costs $150/D. (www.ltcfeds.gov/tools)-and much higher in some areas. What is more frightening, the cost is the physical and emotional cost of caregivers and family.
Some key steps you take in your 40s, 50s, 60s, and yes into your 70s can help protect your retirement savings if you or a family member need care in the future or sooner
The following are some ways you and your family can prepare for potential long-term care needs.
FUTURE LONG-TERM CARE COST
It is not prudent to ignore long-term care costs as you're planning financially for retirement.
We work with clients that range in age range from their mid-30’s into their 80’s+. There is about 70% chance that long-term care may be needed in some form according to the US Department of Health and Human Services (HHS). As a practicing certified financial planner with over 40 years in the business I recognized long ago that long-term care is a risk that we must account for in our financial planning. Therefore, we include the potential long-term care costs impacts when estimating expenses in retirement. As such, we have set a goal for long-term care for the last four years of their expected life.
These costs can vary significantly by location. I don't know, it could be a reason why People decide where to retire but it's worth considering. US Department of HHS site https://www.ltcfeds.gov/long-term-care/options options, the cost of assisted living in LA is nearly $73,365/yr. or $201/Dx365 vs $59,495 in Hampton Roads. Through our financial planning program, we then estimate the impact on a client’s income from all sources given the potential cost of long-term care, i.e., Pensions, Social Security benefits, 401(K) type investments, and insurance. Note, for those with military pensions and possibly VA disability benefits may have additional resources they are encouraged to talk to veteran offices. It is recommends using the tool at the Federal Long Tenn Care Insurance Program website (www.ltcfeds.gov/tools/ cost-of-care) to estimate the cost of care at age 75 in your Zip code where you expect to live. On average women need care for 3.7 years and men for 2.2 years. I know statistics are basically for assisted-living and homecare Remember not all care is created equal. You may start out needing someone to-grocery shop for you, drive you to doctors, and it gradually increases to needing someone to help with daily activities, like getting dressed. Finally, you may need someone to do everything for you. Also factor in your personal risks when estimating the potential costs. You might want to prepare for more years of care if you have a family history of dementia, Alzheimer's, Parkinson's, or Lou Gehrig’s -ALS disease, or you might want to have more money so you can stay in your own home, even if you end up needing 24/7 care. "Some people want to be able to afford that. Of course, a family member cares. Be careful my experiences been the caregiver of a critically ill person becomes critically ill themselves. I have also had to caregivers die taking care of their loved ones.
COVERING LONG-TERM CARE COST
Consider income sources in retirement, available for paying long-term care expenses.
Besides the obvious sources such as Social Security, pension, and retirement, those with veterans’ benefits need to contact the Veterans Administration on the chance that they may qualify for help in covering a nursing home stay in most states, Never-the-less, your income even if you qualify for Veterans Administration help might not be enough especially if both you and your spouse need long-term care. A lot of our clients tend to look at it and say: 'Between my assets and income I think I’ll be okay’. If not, then an insurance and/or annuity solution becomes a possible solution.
The main insurance solution: a stand-alone long-term care policy and a hybrid insurance policy that is traditional insurance combined with a long-term care rider. Both the Stand-alone long-term care insurance and hybrid policies pays for care in a nursing home, in an assisted-living facility, or in your home if you need help with at least two activities of daily living (such as bathing, dressing, eating, and toileting) or if you have severe cognitive impairment. Fewer insurers offer these policies. It is our experience at Costal Virginia Wealth Group, stand-alone policies are expensive, premium increase significantly, and they are difficult to qualify for if you have any medical issues. They're also looking more closely at your family medical history such as Alzheimer’s or dementia.
Note, government employees and military personnel and retirees no longer have access to the long-term care coverage federal long-term care insurance program as this program is “temporarily” closed since December 2022. Those currently covered can keep it.
However, given premium increases to the federal coverage as well civilian coverage, we believe at Costal Virginia Wealth Group it may be preferable to replace such coverage with a hybrid policy rather than drop it as we see clients do. An alternative consideration to protect against the risk of long-term cost for those that do not qualify for a hybrid insurance policy is an annuity that provides long-term care coverage. If either replacing a stand-alone policy with a hybrid policy or an annuity is not feasible, you might be able to keep premiums stable by reducing benefits such as inflation protection, amount or length of coverage. More insurers are now offering highbred insurance and annuity policies riders, and they might be easier to qualify for than stand alone long-term care policy.
HOW THEY WORK
With a hybrid life insurance with a long-term care rider policy, you can receive long-term care benefits payouts are subtracted from the death benefit, but your heirs will receive the money if you don't need much care. With the hybrid annuity, you'll receive a set payout based on your age at the time pay out starts and depending on the company, maybe more if you need long-term care. For example, it might double the payout for up to five years.
STATE VETERANS’ ASSISTANCE
Availability of veterans’ homes has been calling in the last 5 to 10 years. Therefore, veterans looking into care options for yourself or helping an aging veteran, it's worthwhile finding out about the state veterans’ homes in your area. There are 172 state veterans’ homes across the country, and the number is growing. In Virginia there are three veteran homes currently available – Roanoke, Richmond, and Virginia Beach with another under construction in Fauquier County. Contact the Virginia Department of Veteran Services. Also visit www.nash.org/directory for details about cost at state veterans’ homes and help with cost given disability criteria or use of “Aid and Attendance or other benefits.
CONSIDERING LONG-TERM INSURANCE
MOAA offers tools, articles, and resources to help members with their long-term care decisions such as:
*Financial considerations for care at www.moaa.org/ events,
*Financially prepared for this important expense. Www.moaa.log/LTC – calculator,
*For LTC programs visit www.moaa insurance.com, or call (800)-698-7943 to speak to a licensed long- term care consultant.
Neither Medicare nor TRICARE for life covers long-term care, providing coverage only for short nursing home stays or limited in home care when you require readability patient or skilled nursing care after a three day stay in the hospital.
The following are some things to consider when evaluating long-term care insurance options:
*Know the cost and its limits – policies have dearly reimbursement rates as well as maximum number of days they will pay (multiply the daily rate times the maximum number of days equals lifetime amount the policy will pay). Some policies have inflation writers the ability to buy additional coverage.
What are Coverage Types to consider-
Make sure the policy covers adult day centers hospice facilities as well as home care, and nursing home care. Most policies to meet IRS definition of Critical Care will have a 90-day weight before benefits are payable. That is, you’ll have to pay out-of-pocket for the first 90 days. However, a 30-day weight can be obtained. In addition, some policies known as reimbursement policies only pay actual cost while others known as indemnity policies pay dearly limit. Such policies do not require proof of how the money is spent once you meet generally the two activities of daily living i.e. you can pay a family member is not.
Stand-alone policy increases – these plans are guaranteed renewable which means coverage can’t be canceled but premiums can be increased within certain limits.
Tax benefit – long-term care policies have some tax benefits if you itemize. The federal government and the state of Virginia tax codes let you deduct a portion of the premium as a medical expense if you meet certain thresholds to qualify as a qualified tax policy which is that your illness will last 90 days or longer.
Being prepared – In summary, make sure you understand the coverage, the elimination period and terms when considering a long-term care insurance policy. Most important, make sure the insurance company has a top rating from such agencies as standard and poor.
By Patrick Tedesco CFP and or Karen McNabb CFP, Coastal Virginia Wealth Group
Important Disclosures:
This material contains only general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance agent. This article is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. You may also visit your state’s insurance department for more information.