Hope for the best but prepare for the worst—that adage certainly rings true when planning for potential long-term care needs. After all, those turning 65 today have almost a 70 percent chance of needing some type of professional help with the daily activities of living.
And the cost of long-term care can quickly add up. The median cost for a home health aide in 2017 was just over $4,000 per month while a private nursing home room cost over $8,000. Also keep in mind that you might need long-term care for awhile—according to the “Do Retirees Need Long-Term Care Insurance” article, the average length of a long-term care insurance (LTC) claim is three to four years.
You may not realize it, but Medicare won’t pay for home aide services nor does it cover most long-term care services (it will pay for short-term skilled nursing services). As well, even the best Medigap plan will only temporarily supplement nursing home care, according to Paying for Senior Care.
Since there’s no easy answer for how to best prepare for long-term needs, we’ve provided an overview of four possible options to help guide your decision.
1. Long-Term Care Insurance
At one time, the obvious way to fund long-term care was through LTC insurance. This product typically lasts a maximum of three years and covers a daily benefit of $160 for nursing home coverage after a 90-day waiting period. In addition to nursing home services, LTC insurance may cover other care arrangements like assisted living, home care or home modification, as per AARP’s “Understanding Long-Term Care Insurance” article.
These days, however, some pundits advise consumers to take a hard look at whether the benefits of LTC insurance outweigh its cost, which has skyrocketed in recent years. Yearly premiums for insurance with inflation protection can be as high as $4,406 for a 55-year-old woman and $2,309 for a man of the same age, according to the 2016 “Why Life Insurance is Becoming a Tougher Call” article. (Rates are much steeper for those who buy policies after age 65.) The American Association for Long-Term Care Insurance provides some ways to cut costs, but don’t skip buying inflation protection; otherwise, the rising costs of long-term care will eat into any claim, as pointed out in “Should You Buy Inflation Protection For Long-Term Care Insurance?”.
2. Hybrid Insurance
Another alternative is buying whole life insurance that you can draw from for long-term care. Unlike LTC policies, these hybrid policies pay out part of the long-term care coverage as a death bonus if you end up never needing professional help with daily activities like bathing or grooming. You can also lock in your premium upfront, saving you from a sudden sharp rise in premium costs. Nevertheless, hybrid insurance is expensive, sometimes requiring a large up-front payment.
Annuities may be a good option for those with pre-existing conditions as they don’t require traditional underwriting. Do keep in mind, however, that some annuities are unsuitable for funding long-term care expenditures, as in this “Annuities Offer Long-Term Care Funding Flexibility” article. One product to consider is a fixed annuity with a long-term care rider that allows for an increase of income if you require nursing home care, according to “Long Term Care Annuities vs Insurance”. However, nursing home admittance is not required for pure long-term care annuities, which are essentially deferred annuities.
Because annuities are complex products, here’s a guide to understanding the basics. (As with any type of investment product, always speak to a trusted financial professional before buying.)
4. Life Plan At Home Programs (aka Continuing Care at Home)
Finally, if you want to live at home yet want the security of a life plan community consider a Life Plan At Home program, which includes care coordination, home care, an annual physical, and access to a life plan community campus. On top of that, you can transition into facility-based personal care, memory support or skilled nursing if necessary. This kind of comprehensive care comes with a substantial price tag– the upfront fee typically ranges from $15,000 to $50,000 and monthly service fees from $300 to $600.
In fact, none of the above options is particularly cheap, but all offer a huge benefit, the peace of mind of knowing that your bills will be covered should your health unexpectedly decline.
Financial Stability for Future Care