When you’re working on your retirement savings, ask yourself this question; do you think that your nest-egg could take a half-million dollar hit? The fact is, even the most financially astute person could face a huge setback in their retirement plans if they suddenly were faced with a $500,000 bill and, unfortunately, that’s happening to more and more people every day as they get hit with the cost of Long Term Care (LTC).
The sad fact is that long-term care can quickly and easily decimate a lifetime’s worth of careful retirement planning. Even worse, it’s such a random happening that it’s extremely difficult to simulate the effects using any type of financial plan. The fact is, no matter how carefully you might have saved or how good your investment strategy or asset allocation plan, if you, your spouse or someone else in your family suddenly needs long-term care those plans could end up in the garbage.
Even worse is that, unless you’re already destitute and qualify for Medicaid, the federal government has no program (and isn’t planning one) that will take care of you. Nursing homes aren’t covered by your health insurance or Medicare and, once you’re released to any kind of long-term care facility by a hospital, your medical coverage stops paying. Even worse, after only a single day of hospitalization you may already need long-term care.
When you consider that the average cost for a semiprivate nursing home room is over $90,000 a year it’s easy to see how quickly a half million dollars can get used up and, even worse, many people who need long-term care need it for a longer period than five years. Now, truth be told, there’s also the home healthcare option as well as assisted living facilities that are going to be a bit less than this but, in most cases, the savings aren’t all that substantial.
Want some more bad news? The chance that you’re going to need long-term care during your lifetime are very high. Not only is there a 70% chance that you’ll need it once you hit 65, the startling fact is that 40% of people who need long-term care are actually between the ages of 18 and 64. For couples the odds are even worse and, even if neither of you needs long-term care, there are many people all over the country that are in serious debt because of the costs of paying for the long-term care of another family member.
What this basically leaves is two choices for the average consumer, either paying for long-term care insurance which is quite expensive or rolling the dice and not purchasing long-term care insurance at all.
The reason that long-term care is so ridiculously expensive is that, for insurance companies, the risk is incredibly high. People are living much longer today and so there’s a much greater chance that, at some point in their life, they’re going to need long-term care and need it for a long period of time. One telling sign here is that dozens of insurance carriers have gotten out of the long-term care market, a sure sign that providing the coverage is costing them more money than it’s worth.
Making matters more complicated is the fact that ‘triggering events’ for long-term care vary greatly, there are different waiting periods before coverage will start, coverage amounts vary widely and the length of time that a coverage will continue is also a big variable. There are multiple types of payment plans also, including those that require you to pay into the insurance for practically your entire adult life, pay until you reach the age of 65 or only pay for a period of 20 years, and each type of course costs a different amount.
Because of the exorbitant cost of LTC many people try to outfox the system and wait until just before they need it but, since insurance companies generally are run by people that are rather intelligent, in many cases this technique is unsuccessful. Most experts will tell you that purchasing and paying for LTC is best between the age of 40 and 60 years old and not try to beat the system.
The fact is, even though LTC is complex, expensive and relatively hard to get, unless you are incredibly wealthy or staggeringly poor, you’d best take a long, hard look at your options, make an informed decision and get long-term care insurance as soon as possible.
The good news is that if you limit your years of coverage, start paying for LTC insurance early and also accept a longer elimination period before your coverage starts, you’ll be able to keep your premiums at a tolerable level. Your best advice is to find an insurance agent with expertise in long-term care insurance and a company with extensive experience in the same. There are at least six excellent carriers that still remain in the market and, if you’re between 40 and 60, in good health and financially able, the chance of finding a LTC plan that fits your budget is a good one.
The take away from this is that, with a very high risk of needing long-term care and consequences that can be devastating to your retirement plans, most people should very carefully consider their LTC options so that they don’t find themselves facing retirement with their finances already in ruin.
If you need help or advice about long-term care insurance or have retirement planning questions, please let us know and we’ll do our best to provide you answers and options.