According to the latest statistics, about 70 percent of Americans who live past 65 will require some form of long-term care.¹ It may be temporary to recover from an illness or injury. Or it may be a more permanent situation in the last years of life. In either case, there are two important reasons to prepare for long-term care: One, you will want to have options for the type and quality of care you receive. And two, it will be costly, and most of the cost will not be covered by insurance or Medicare.
Even with Medicare factored in, long-term care costs can be damaging—even devastating—if they are not realistically accounted for in your retirement plan. Just consider the estimated monthly costs of various types of long-term care as determined by the most recent Genworth Cost of Care Survey: ²
- In-Home Care: $4,957 (homemaker services), $5,148 (home health aide)
- Community and Assisted Living: $1,690 (adult day health care), $4,500 (assisted living facility)
- Nursing Home Facility: $7,908 (semi-private room), $9,034 (private room)
Again, those are monthly costs, and studies consistently show that most Americans are ill-prepared to meet them.
Long-Term-Care Insurance
Purchasing long-term care insurance is an option that can work well for many individuals and families, depending on their individual goals, needs, and situation. According to a survey, roughly 72% of Baby Boomers whose parents had long-term-care insurance said they believed it was a good value for many reasons. These included increasing quality of life, ultimately decreasing the family’s financial contribution for care, and preserving their parents’ nest egg. Among Boomers who didn’t have coverage, 71% said they believed it would have benefited their families.³
Hard numbers also illustrate the potential value of LTC insurance for many individuals. For example, compared to those without LTC coverage, those with insurance can reduce their out-of-pocket care costs by between $3,000 and $5,000 a month (depending on the service setting), according to a study by American Health Insurance Plans.⁴ In addition, the average yearly cost for LTC insurance is equal to half the amount of one month in a nursing home or one month of professional in-home care.
Tax Breaks
There is more positive news regarding LTC insurance where taxes are concerned. According to the American Association for Long-Term Care Insurance (AALTCI) advocacy group, the tax-deductibility of some qualified LTC plans can provide significant value to consumers, especially after they retire when a person’s income often declines.⁵
At Retirement Care Plans, we can help you analyze all your options when it comes to preparing for long-term care and help you make the best choice – one that better ensures you can enjoy your retirement years with more confidence and less stress.
Call our office today to schedule a complimentary, no-obligation consultation.
Frequently Asked Questions
- What is long-term care insurance?
Long-term care insurance is a policy that helps cover the costs of long-term care services, which are not typically covered by regular health insurance or Medicare. These services include in-home care, assisted living, and nursing home care. - Why should I consider purchasing long-term care insurance?
Purchasing long-term care insurance can help protect your savings and assets from being depleted by the high costs of long-term care. It provides financial security and peace of mind, ensuring you have access to quality care without burdening your family financially. - How does long-term care insurance provide guaranteed income?
Long-term care insurance itself does not provide guaranteed income. However, by covering the significant expenses associated with long-term care, it helps preserve your savings and income streams, ensuring that your financial resources can be used for other retirement needs. - Are there tax benefits associated with long-term care insurance?
Yes, some long-term care insurance policies are tax-deductible. The American Association for Long-Term Care Insurance (AALTCI) notes that these tax benefits can be particularly valuable after retirement, when your income may be lower. - What factors should I consider when choosing a long-term care insurance policy?
When selecting a long-term care insurance policy, consider the coverage options, policy limits, premium costs, and the financial stability of the insurance provider. It’s also important to understand the policy’s terms and conditions, including any exclusions or waiting periods. - Can I use long-term care insurance in conjunction with Medicare?
Yes, long-term care insurance can be used to cover expenses that Medicare does not, such as extended nursing home stays, in-home care, and assisted living facilities. It complements Medicare by filling in the gaps in coverage.
Sources:
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“Long-Term Care Statistics 2024,” Jan. 2024, sinclecare.com
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https://www.genworth.com/aging-and-you/finances/cost-of-care.html
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Mathew Greenwald & Associates, Market Research Survey, 2010
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America’s Health Insurance Plans, “The Benefits of Long-Term Care Insurance and What They Mean for Long-Term Care Financing,” November 2014