Do You Have a Plan for Covering Long Term Care Expenses in Retirement?

The cost of expert medical care in America continues to soar. According to the Genworth cost of care overview, the cost of a year of nursing home care in the U.S. averaged $80,300, with a projected 5-yr annual growth of 4%, which would be roughly $97,697 after the fifth year if growth remains consistent. However, in some states such as Alaska, the yearly cost of this care can spike as high as $281,415!

These enormous costs make this kind of long-term care a huge financial burden for almost any retiree. What many retirees might not realize is that there’s a 70% chance that any American at or over the age of 65 will need some form of long-term care during their lives, according to longtermcare.gov.

How do you plan to cover the cost of long-term care such as nursing home care or extended hospital stays?

Three Ways to Fund LTC

There are several ways to fund long-term care, three of which are:

  • Self-insuring: If you have a large and liquid portfolio, you may be able to pay “out of pocket” for your LTC expenses. The exact amount of funds you need depend on a few factors, such as the how long you need care for, where you live, and the nature of your treatment/care needs. Needless to say, this is not a viable option for the average American.

  • Buying Long Term Care Insurance: You can buy a special form of insurance that can cover a specified amount of daily care if you need it. There are a few reasons many retirees buy this kind of insurance: greater control in choosing where you get care, peace of mind knowing that this likely liability has been addressed and asset protection to insure that much of your retirement assets go to your heirs and are not drained by medical expenses.

  • Using Medicare: Unfortunately, Medicare will only cover a very limited portion of your extended medical costs. Medicare’s skilled nursing facility (SNF) benefit will only cover up to 100 days of skilled nursing home care in a single benefit period. If the care isn’t skilled, in a nursing home, or is not cited as being medically necessary by a medical professional, Medicare’s SNF benefit won’t kick in at all. Even if you do qualify, for each day past the twentieth, you must pay a coinsurance fee.

As a last line of defense, Medicaid may pay for nursing home care if you meet certain criteria, such as having an income within a certain percentage of the federal poverty level and having spent most of your assets. Unfortunately, if you qualify for Medicaid, it probably means you are now low-income and have few assets remaining.

Paying for long-term care can be a financial disaster waiting to happen, so take steps to protect yourself as soon as possible against this all-too-common retirement risk.

Fixed Insurance products and services offered through Thayer Partners, LLC.

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