Think of your retirement plan like a long road trip you've meticulously planned.
You have your route, your savings are your fuel, and your investments are your engine.
You wouldn't embark on a cross-country trip without a spare tire, would you? What if you knew there was a 70% chance you would get a flat along the way? Would you cross your fingers and hope you are one of the lucky ones? You hope you never get a flat, but if you do, that spare tire prevents a minor inconvenience from becoming a major crisis, leaving you stranded or derailing your entire trip. Long-term care insurance is that spare tire for your retirement journey. The 'flat tire' is needing help with daily activities due to illness or cognitive decline. Without it, you could be forced to 'sell parts of your car' (deplete your savings rapidly) or rely on family in ways that are incredibly burdensome.
With LTC insurance, you have a dedicated resource to handle that 'flat tire,' allowing your primary retirement 'vehicle' to stay intact and on course.
Let’s look at some facts.
As Americans live longer, the likelihood of needing long-term care in old age increases significantly, with nearly 70% of individuals turning 65 expected to require such services. The cost of long-term care is substantial, with monthly expenses ranging from $6,000 to $11,000 and an average nursing home stay lasting 485 days. Kiplinger
Without proper planning, these expenses can deplete estates and leave families with financial burdens. Medicare generally doesn’t cover long-term care, and Medicaid only applies to low-income families. This makes it crucial to consider strategies to manage potential long-term care costs.
Understanding Long-Term Care Costs
According to Genworth’s 2023 Cost of Care Survey:
A private room in a nursing home costs about $116,800 a year
Home health care averages around $75,500 a year
Even part-time homemaker services can run over $68,000 a year
And most people stay in care for over 16 months—nearly a year and a half. These aren’t small numbers.
Medicare and Medicaid Won’t Cover It All
Many people think Medicare pays for long-term care—like skilled nursing for up to a certain number of days. But it doesn’t cover assisted living.
Medicaid can help, but only after you’ve spent down nearly all of your assets. That’s why planning ahead is so important.
Strategies to Manage Long-Term Care Costs
Long-Term Care Insurance
Traditional long-term care insurance can help cover the costs of care. However, premiums can be expensive, and policies may not coverall types of care. It's essential to carefully review policy details and consider your specific needs.Hybrid Policies
Hybrid policies, which combine long-term care insurance with life insurance, have become increasingly popular alternatives to traditional long-term care insurance.Asset-Based Policies
Asset-based long-term care insurance policies feature leveraged LTC coverage (about 3:1) in addition to a death benefit. These policies pay regardless of outcome: if you need coverage, it is there; if you cancel your coverage, there can be return of premium options and/or cash value; if you never make a claim before you die, your beneficiaries will receive a death benefit.
Planning Ahead
This is where the Bucket Plan System plays a crucial role in retirement planning. The ‘Later’ Bucket is meant for money you’ll need 10 years or more from now. This includes planning for things like long-term care as you get older. Putting money or insurance in your Later Bucket can help cover these costs without hurting the rest of your retirement savings. Planning early helps protect your money and gives you peace of mind for the future.
Book a no-cost consultation call with an advisor from Evergreen Wealth Advisors to kick start your Later Bucket planning. You can better prepare for future care needs and develop a comprehensive plan that aligns with personal circumstances and goals.