If you’re fortunate, you’ll live independently and in good health throughout your retirement years. However, if you ever needed some type of long-term care, such as a stay in a nursing home, would you be financially prepared?
To answer this question, you may want to evaluate two variables:
your likelihood of needing long-term care and the cost of such care.
Consider the following:
• Someone turning age 65 today has an almost
70% chance of eventually needing some type of
long-term care, according to the U.S. Department
of Health and Human Services.
• The average cost for a private room in a nursing
home is about $100,000 per year, while a home
health aide costs about $50,000 per year, according
to Genworth, an insurance company.
Clearly, these numbers are worth thinking about.
If you needed several years of long-term care, the
expense could seriously erode your savings and
invest-ments. And keep in mind that Medicare
typically pays only a small percentage of long-term
care costs. Therefore, you may want to evaluate the
following options for meeting these expenses:
SELF INSURE –
You could “self-insure” against long-term care
expenses by desig- nating some of your investment
portfolio for this purpose. However, as the
above numbers suggest, you’d likely have to put
away a lot of money before you felt you were truly
protected. This could be especially difficult, given
the need to save and invest for the other expenses
associated with retirement.
LONG TERM CARE INSURANCE –
When you purchase long-term care insurance, you
are essentially transferring the risk of paying for
long-term care from yourself to an insurance
company. Some policies pay long-term care costs
for a set number of years, while others cover you
for life. You can also choose optional features,
such as benefits that increase with inflation. And
most long-term care policies have a waiting period
between 0 and 90 days, or longer, before benefits
kick in. You’ll want to shop around for a policy that
offers the combination of features you think best
meet your needs. Also, you’ll want an insurer that
has demonstrated strength and stability, as measured
by independent rating agencies. Here’s one
HYBRID POLICY –
A “hybrid” policy, such as life insurance with a long-term care/ chronic illness rider, combines long-term care benefits with those offered by a traditional life insurance policy. So,if you were to buy a hybrid policy and you never needed long-term care, your policy would pay a death benefit to the beneficiary you’ve named. Conversely, if you ever do need long-term care, your policy will pay benefits toward those expenses. And the amount of money available for long-term care can exceed the death benefit significantly. Hybrid policies can vary greatly in several ways, so, again, you’ll need to do some research before choosing appropriate coverage.
Ultimately, you may decide you’re willing to take the chance of never needing any type of long-term care. But if you think that’s a risk you’d rather not take, then explore all your coverage options carefully. There’s no one right answer for everyone – but there’s almost certainly one for you.
Have questions about your 401(k)? CALL 407-891-7833 to make an
appointment with Cleve Grissom – Your Edward Jones Financial Advisor
final point to keep in mind: Long-term care premiums get
more expensive as you get older, so if you’re interested in this type of coverage, don’t wait too long to compare policies.