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Are You Ready to Pay for Long-Term Care When You Retire?

Andy Smith
By Andy SmithMarch 8, 2018

As parents, we’re so focused on taking care of our children that making plans for our own care can come in as a distant second. But planning for your long-term care in retirement could be well worth the effort.

For example, did you know that someone turning 65 today has almost a 70% chance of needing some form of medical or living assistance as they age? That help can come with a hefty price tag that can impact you and your loved ones if you’re not prepared. How much? The average projected lifetime healthcare cost for a couple retiring as recently as 2015 was $266,589.

Long-Term Care Options

The good news is that you have options. Knowing what your options are now and planning ahead can help you avoid needing help later.

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Some of your long-term care options include:

  • Adult daycare: Generally associated with a home-care agency or a skilled nursing facility, adult daycare provides supervision and social activities to the elderly during daytime business hours. The average daily rate for adult daycare is less than half of what assisted living costs, approximately one-third of what home care costs and almost one-fourth of what nursing home care costs.
  • Assisted living: Assisted living residents get help with daily living — which entails basic health services as well as recreational and social activities — for an average cost of $3,628 per month. Costs include monthly rent, with variable fees based on required levels of service.
  • Home health care: Home health care offers a wide range of healthcare services for illness or injury. The average monthly cost is about $3,861, making it a more affordable care alternative.
  • Nursing home care: Nursing homes provide daily activity care to residents through professional and non-professional medical staff. It’s generally the most expensive option available, ranging from $6,844 to $7,698 monthly, depending on accommodations. Many nursing homes aren’t government regulated or Medicare or Medicaid certified.
  • Skilled nursing: Usually covered by Medicare and Medicaid, these facilities employ registered, practical and vocational nurses to supply rehabilitation and other related health assistance for a specified period of time, generally up to 100 days.

Ways to Pay for Long-Term Care When You Retire

Knowing about your long-term care options is one thing, but how best to pay for them?

1. Check your current policy.

You may already have an option for long-term care in your insurance policy. Carefully read your agreement to see if you’re covered or give your agent a call to walk through it.

2. Insure yourself for the long-term.

Generally, long-term care insurance (LTCI) covers adult daycare, home-health care, time spent in a nursing home or personal care for people over 65. LTCI can also cover people who have a chronic or disabling condition that requires constant supervision. But long-term care policies can be complex with expensive annual premiums that increase over time. If you’re thinking about such a policy, be sure to comparison shop, buy early to keep your premiums low, and see that it covers as many types of long-term care as possible.

3. Look into an HSA.

If you’re in a high-deductible health plan, you might have access to a health savings account (HSA). An individual can save up to $3,250 in pre-tax income annually and can also roll over your balance each year so your funds can accumulate. Plus, you aren’t taxed at withdrawal either. Check your current health care plan for an HSA option. It can be a great way to save for future healthcare needs.

4. Save more.

You could increase your contributions in your individual retirement account or your employer-sponsored retirement plan to pay for your future long-term care needs. You’ll continue to receive tax benefits while growing your account. If you need money for medical expenses before you reach age 59-½, you may be able to take advantage of an exception to the 10% early withdrawal penalty that allows you to take money out for certain medical expenses.

5. See what else is available.

Depending on your finances, you may qualify for Medicaid — or if you’ve served in the military, you may qualify for veterans’ benefits. If those options aren’t available, check with your current employer to see about retiree medical benefits.

If you’re not sure which long-term care option is right for you, consult your financial advisor, who can help you weigh the options and select the best one for your specific situation.

Planning ahead today can help ensure that you have options when you are older and need some additional form of care.

How are you preparing to pay for long-term care when you retire? We’d like to hear your stories and tips in the comments below.

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Andy Smith
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Andy Smith
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