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Long-term care is increasingly becoming one of the more complicated financial planning items for individuals, couples, and families as it is so difficult to project and plan.
Most of us have a retirement date, we know when our kids will begin college, when our home will be paid off, and we have a pretty good idea of when we will begin social security.
We have no idea if we will need long-term care, when that care would begin, how long it will last, or how much it will cost.
The planning is very much a gray area, but I think the discussion can be helpful. Below are a list of questions/discussion points to better understand long-term care, but first let’s start with some rough statistics for context from the NYS Partnership for LTC and the below referenced article:
Cost: $120,816 per year or $331 per day average for nursing home care in the central region of NY.
Occupancy: Roughly 70% of nursing home residents are female.
Time: An average long-term care need of 1.5 years for men, and 2.5 years for women.
Length: 14% of people will need long-term care for more than 5 years.
More long-term care statistics – https://www.morningstar.com/articles/879494/75-must-know-statistics-about-long-term-care-2018-edition
What is long-term care insurance?
Long-term care insurance will help to cover the cost of in-home care, assisted living facilities, and nursing home care to help individuals live as independently as possible when they lose the ability to perform everyday activities on their own.
How does this insurance work?
Two popular types of policies, reimbursement and hybrid. Reimbursement policies will reimburse you for long-term care service up to a certain dollar amount per day or month. If you never need the care, the premiums you paid in stay with the insurance company. A hybrid policy is similar but provides a death benefit to your beneficiaries should you never need the care.
Are the policies costly?
Yes, a couple could easily pay over $10,000 per year for this insurance. In fact, the insurance company reserves the right to petition the state insurance board to increase premiums in the future should claims come in larger than expected. This recently happened with several companies such as John Hancock and GE, and many companies are leaving the long-term care industry all together.
Are there other options?
Yes, in addition to help from family members a person could self-pay. There are private companies that will help with long-term care needs for individuals and charge hourly rates around $20-$30 depending on the service. These services will also provide additional help such as grocery shopping, transportation, etc.
Do I need to protect my house and assets with a trust?
Medicaid trusts are quite popular these days. How they work is you place all non-retirement assets in this trust, and as long as they stay in the trust for 5 years, you may be able to qualify for Medicaid and those assets would be protected.
The question then becomes, is it more important for you to protect those assets and pass them along to heirs, or to spend them down and have greater control over the type of care, should you need it, later in life?
There are also contractors that will come to your house and help make it easier to navigate your home as a senior. Simple things such as changing door knobs from the twisting type to a simple pull down, widening hallways, and adding handrails.
Technology is also making it easier for seniors to remain in their home. There are delivery services for everything from food to wine, and we can shop at the largest mall in the world (Amazon) from the comfort of our living room.
To summarize, there is no easy way to plan for long-term care needs. I think we all would like to remain in our homes, and some proactive planning could help in that regard, starting with the discussion itself.
I hope this information was helpful, if you have any questions or would like to discuss in more detail please do not hesitate to contact the office.