Although most people understand the importance of saving for retirement, this is not always the case when planning for long-term care. When you’re young and healthy, it can be challenging to envision a time when you or your spouse may need help with basic functions. But, according to the Administration for Community Living (ACL), someone turning 65 today has almost a 70% chance of requiring long-term support to care for themselves.1
Proactive planning can help ensure your wishes are fulfilled and lessen the emotional and financial burden on your loved ones in your golden years.
Have the Tough Conversations
Long-term care can include everything from assistance with day-to-day activities such as bathing, eating, dressing, getting around, and using the bathroom—to more intensive therapy or medical assistance from skilled healthcare personnel.
Although thinking about losing your independence can be uncomfortable, delaying your planning can result in higher insurance premiums, reduced coverage, and limited care options.
By initiating these conversations with your partner, children, or family members, you can devise a plan to meet your future needs, ensure you’re prepared financially, and reduce stress for everyone involved.
Some questions to jumpstart these conversations include:
- Who do you want to oversee your care? This may be a partner, family member, friend, or professional care provider. Taking on sensitive duties can change the dynamics of close personal relationships, so that’s something to consider.
- If you choose someone close to you, are they emotionally, physically, and financially equipped for this role? Caregiving generally requires 24 hours per week—and uncompensated expenses can add up to more than $7,000 annually, according to a report by Penn Nursing.2
- Where do you want the care to be provided? Although most people prefer home care, this may change with your healthcare needs as you age. Alternatives include assisted care facilities and nursing homes.
Not everyone has a partner or family to help support their long-term care needs. In these circumstances, we recommend purchasing long-term care insurance earlier rather than later and researching local community resources such as meal delivery, transportation, home doctor visits, and other services to provide aid when the time comes.
Develop a Plan for Covering Costs
Healthcare is among the most significant costs in retirement, and many people will need to pay at least some long-term care expenses out of pocket. According to the ACL, women typically need care for 3.7 years, while men require 2.2 years on average.3
If you’ve decided to rely on professional long-term care rather than a loved one, you must be prepared for some significant costs. According to the 2023 Genworth Cost of Care Survey, national annual median costs include $64,200 for an assisted living facility, $104,000 for a semi-private room in a skilled nursing facility, $116,800 for a private room in a nursing home, and $75,500 for a home health aide.4
With these estimates in mind, it’s important to determine how you will fund your extended care needs. Common methods include:
Self-funding: Paying your way typically involves earmarking funds from your savings, Social Security benefits, pension, or a retirement account such as a traditional IRA, Roth IRA, or Health Savings Account (HSA). When deciding where to hold your assets, it’s important to consider tax implications such as deductions for qualified LTC expenses or liabilities for withdrawals.
LTC insurance: An insurance policy can help pay for LTC needs, including nursing home or home care services. You become eligible for benefits when you can no longer perform daily living activities such as bathing, eating, and dressing or become cognitively incapacitated. Coverage is generally capped at specific amounts daily or monthly up to a lifetime maximum or a set number of years.
Hybrid Life Insurance and LTC: Newer hybrid policies combine long-term care coverage with life insurance that will go to your heirs if you never use the LTC benefits. If you do file a claim, this payout is reduced or eliminated. This flexibility allows you to use LTC coverage as needed, as a death benefit if you pass away without using it, or potentially cash in your policy if your needs change. However, hybrid insurance is typically more expensive than traditional plans.5
Navigate Long-Term Care Planning with Ease
Thoughtful long-term care planning can provide peace of mind, knowing that you and your loved ones are prepared if (and when) you need assistance.
Crescent Harbor can facilitate conversations with your family, provide objective advice, and help you develop a long-term care plan tailored to your unique needs and wishes.
Let’s plan today for your care needs tomorrow.
Sources
1 https://acl.gov/ltc/basic-needs/how-much-care-will-you-need
3 https://acl.gov/ltc/basic-needs/how-much-care-will-you-need
This material is for informational purposes only and should not be construed as tax or legal advice.
Registered Representatives of Sanctuary Securities Inc. and Investment Advisor Representatives of Sanctuary Advisors, LLC. Securities offered through Sanctuary Securities, Inc., Member FINRA, SIPC. Advisory services offered through Sanctuary Advisors, LLC., an SEC Registered Investment Advisor. Crescent Harbor Private Wealth is a DBA of Sanctuary Securities, Inc. and Sanctuary Advisors, LLC.