Your retiree years can be some of the best years of your life
But, they could also be some of the most expensive years of your life. With age comes health problems, and the possibility of long term care. You may not think a nursing home is for you. The unfortunate truth is that many older individuals find themselves needing long term care assistance at some point.
Long term care does not necessarily refer exclusively to nursing homes. It could be a live in nurse or another form of home care, rehabilitation programs or hospital stays. Either way, the primary problem with long term care is that it is expensive. Also, your retirement fund isn’t likely going to be able to cover the full costs of long term care.
Long Term Care Insurance
You may be thinking that you can just get long term care insurance to cover your future health expenses. However, before you consider adding long term care insurance you should first consider the cost.
Long term riders can be a great addition to your life insurance. They can cover the costs that Medicaid, Medicare and life insurance fail to cover. Consider this statistic from the Centers for Medicare and Medicaid Services: over 60% of individuals over 65 years of age (right near the national average for retirement) will require long term care services at some point in their lifetime. Combine that knowledge with the Employee Benefit Research Institute’s (EBRI) estimate that nursing homes cost an average of $83,580 annually, and you may start to panic about your future care.
Once you purchase a long term care coverage, you can renew it for the rest of your life. This means that – regardless of your health – if you continue to make payments for your coverage, you will not lose coverage.
The downside to this type of coverage is that it is expensive. You will need to plan to add it to your current financial plan.
You may feel you have saved a lot of money for your retirement. However, have you considered additional costs such as medical bills, mortgages and additional expenses?
For married couples, especially, there are issues when long term care is not included in a retirement plan. If one spouse falls ill or needs care, the other spouse would naturally assume the role of caregiver when applicable. The problem with this is the stress of care-giving could leave both parties in poor health.
One spouse may need to go into a nursing home for care. Using your retirement plan funds can will be considered to pay for it could have a detrimental financial impact on the healthy spouse. The financial impact of care should not be ignored for single individuals, either. The expense burden of nursing home or hospital care should always be included in your retirement plan.
Weighing Your Risk
We already covered the estimated cost for nursing home care, but how much will your long term care cost you? Essentially, when considering long term care options, it all boils down to pay more now, or pay more later.
A long term care rider added to your life insurance policy is expensive; however, if you do not use the policy, you can save the premiums by adding a return-or-premium rider. Additionally, the cost may be worth it when you compare it to what you could pay out of your retirement fund. This is because you will ultimately be paying smaller increments over a number of years rather than funding your long term care costs all at once.
While long term care riders stay with you for life, they are not permanent. You can always drop your long term coverage should you fall on financially difficult times or should you decide this coverage is not right for you.
The biggest worry with long term care coverage is that you will pay for long term care insurance that you may never use. Good health is never a guarantee; however, neither is poor health.
If you are risk averse, you should speak to your financial adviser or a life insurance agent before adding long term care to your financial plan. Be sure to consider your family history of diseases such as Alzheimer’s, heart disease and stroke – all of which could impact your likelihood of needing long term care. And remember: long term care insurance and long term care preparation does not have to be expensive. There are other ways of funding long term care, such as fixed annuities with long term care benefits.
Your retirement plan should be used to fund your later years, and to most, this may include the cost of medical care or long term care. The problem is that most Americans have not saved enough for their retired years. You should speak to a financial adviser and come up with a solid financial plan in the event that you or your spouse need long term care.