Preparing Now for Tomorrow’s Expenses
Planning for the future involves thinking about various scenarios that we may experience over time. We know it is important to take steps like estate planning and saving for retirement, but we also must financially prepare for the possibility that our physical needs will change. Most of us hope to stay independent as long as we can, but the reality is that many families will eventually face decisions around long-term care. Sometimes this need arises suddenly due to an accident or an illness. Other times, it develops gradually as we age and our daily needs change. Either way, it is essential to learn more about long-term care and the associated costs so we can be ready if this time comes.
What is long-term care?
Long-term care (LTC) refers to a wide range of services designed to help individuals who can no longer perform everyday activities on their own. This may include assistance with bathing, dressing, eating, or moving around. These are referred to as “activities of daily living (ADLs).” Or it can involve ongoing medical support depending on a person’s needs.
Long-term care may be provided in various settings:
- At home, with part-time or full-time caregivers
- In an assisted living facility
- In a nursing home
We may think of older adults when discussing LTC, but a sudden accident, chronic illness, or unexpected diagnosis can create long-term care needs at any age. Recent research shows that between ages 40 and 50, about eight percent of adults experience a disability that could require long-term care. This highlights the importance of preparing for these potential costs as early as possible.
How much does long-term care cost?
This is not a one-size-fits-all answer. If someone needs part-time in-home assistance it will be different than 24-hour medical care provided in a nursing home. Some may need care for a few months and others may need it for several years. Regionally costs vary as well. According to the most recent Genworth Cost of Care study, monthly median costs in the New York area are:
- Home health aide services (44 hours per week) $6,864
- Assisted living (in a private, one bedroom) $8,975
- Nursing home care in a semi-private room costs $14,296
- Nursing home care in a private room costs $15,056
Options for Paying for Long-Term Care
As Medicare and most health insurance plans do not cover long-term care services, planning for how you will handle these costs is important. Here are some options to consider:
- Self-Funding – Some individuals choose to fund care from their savings or investments, but it is an approach that requires careful planning so that you can stay on track to meet your other financial goals.
- Long-Term Care Insurance – These policies help pay for home care, assisted living, or nursing facilities by providing daily or monthly benefits for a set period of time. It is important to note that you may not qualify for a standalone long-term care insurance policy if you are in poor health, over 80 years old or have pre-existing medical conditions. However, if you enroll in long-term care insurance through a group plan, such as a policy offered by an employer, you can typically enroll regardless of your health history.
- Hybrid Long-Term Care Policies – A combination life insurance policy may offer a long-term care benefit. If you need to use the LTC benefit, the death benefit will decrease. Or you may have an option to add an LTC rider to your life insurance policy. This is often a less expensive option than paying for a standalone long-term care policy.
- Medicaid – Medicaid may help cover long-term care costs, but it has strict income and asset requirements. There are various trusts, such as a Medicaid Asset Protection Trust (MAPT) which can be utilized to help you meet the financial requirements to qualify. Your financial advisor can help you review your specific situation and determine if this might be a suitable option.
- Veterans Affairs – If you served in the military, you may be eligible for long-term care services through the U.S. Department of Veterans Affairs.
- Health Savings Accounts (HSAs) – If you have an HSA, funds can be used tax-free for qualified long-term care expenses.
How Your Financial Advisor Can Help
It can be hard to think of yourself being unable to function independently. Add to that the unknown variables of when, or for how long, you may need long-term care, and it’s easy for anyone to feel overwhelmed. At Frisch Financial Group, we are fiduciaries, so you can count on our guidance to always put your best interests first. We take a holistic view of your finances and help you plan for long-term care while keeping you on track with your other goals, such as saving for retirement and preserving the assets you have worked hard to build.
Ideally, long-term care planning begins well before you need it. Starting early often means having more choices, greater flexibility, and access to more affordable insurance. However, it’s never too late to evaluate your options. Individuals at any age can take steps to understand long-term care costs and incorporate strategies into their financial plan to help manage these future needs. If you would like more information, please contact us.
