When Planning for Your Retirement, Do Not Forget Your Long Term Care Insurance
Posted in: Personal Insurance
We hear a lot about the importance of adequately planning for a successful retirement but there is often a hole left during this planning process when considering the cost of medical care. More than two-fifths (42%) of people age 65 and over have reported a functional limitation. Eighteen percent had difficulty with one to two basic activities of life (ADLs) [Source: 2009 Long Term Care Insurance Sourcebook, American Association for Long-Term Care Insurance]. Unfortunately these statistics prove that there is a high probability that you or a loved one will one day no longer be able to perform the basic activities of life and will need the extra care.
Planning for a successful retirement is a well-known goal, but one crucial aspect often gets overlooked: the cost of medical care. As you age, the need for medical assistance becomes more likely, making long-term care insurance a critical consideration. Here, we’ll explore why long-term care insurance is essential, how it can benefit you, and whether it’s worth the investment.
Understanding the Need for Long-Term Care
Statistics show that more than 42% of people aged 65 and over report functional limitations. Around 18% experience difficulty with one to two basic activities of daily life (ADLs) [Source: 2009 Long-Term Care Insurance Sourcebook, American Association for Long-Term Care Insurance]. These numbers highlight the high probability that you or a loved one may eventually require assistance with basic activities of daily living.
The Role of Long-Term Care Insurance
Long-term care insurance is designed to cover custodial care costs for a predetermined period, filling a gap left by health insurance, social security, or Medicare. When you can no longer perform ADLs such as bathing, eating, walking, transferring (getting in or out of a bed or chair), dressing, or toileting, and daily hands-on care is necessary, expenses can escalate rapidly. In-home care, for example, can range from $14 to $24 per hour, or even more depending on specific needs. Residential care in community facilities can cost between $48,000 to $96,000 per person per year.
Long-term care insurance can cover care in your home, assisted living, adult daycare, or a nursing facility, depending on your situation. Unlike medical/health insurance, social security, and Medicare, which do not typically cover this type of care, long-term care insurance can help cover most or all of these costs.
Additionally, a long-term care insurance policy can secure your placement in an assisted living or nursing care facility or allow you to utilize a home healthcare agency. As demand for these residential care facilities and agencies grows due to the aging baby boomer generation and increased lifespans, having long-term care coverage becomes more valuable. It guarantees payment to the facility or agency, ensuring you receive the care you need. As operational costs rise, a long-term care policy can be more attractive than cash savings, which may eventually deplete. Long-term care insurance safeguards both your care and your financial well-being.
Choosing Long-Term Care Insurance
The cost and availability of long-term care insurance are influenced by your age and health. It’s typically advisable to start shopping for and purchasing a policy in your mid-50s to early-60s. If you have a family history of genetic disorders like Alzheimer’s or Parkinson’s, you might want to consider coverage at an earlier age.
Investing in long-term care insurance provides peace of mind for you and your family. It ensures that if you ever need long-term care due to the inability to perform basic ADLs, you’ll receive the necessary care without depleting your finances. Long-term care is an essential component of retirement planning, and we encourage you to reach out to Curt Wilkerson at Curtis@psafinancial.com or 443.798.7318 to discuss whether it should be part of your future plans. Planning now can secure a more comfortable and financially stable retirement.