Broker Check
Long-Term Care Planning: What You Need to Consider

Long-Term Care Planning: What You Need to Consider

October 17, 2022
Share |

While planning for long-term care may seem unnecessary, unexpected events that occur can be costly if not properly prepared for. The financial burden may not only fall on you, but it could also fall on your family members. Long-term care planning can help alleviate potential unexpected costs, which is vital to your ongoing financial plan. With annual Medicare enrollment approaching (October 15 – December 7), it’s the perfect opportunity to start thinking about a protection plan in case you or your loved ones become ill and are unable to care for themselves.

 What is Long-Term Care?

Long-term care (LTC) offers various services that help meet the medical and non-medical needs of people with a chronic illness, injury or severe cognitive disorder who cannot care for themselves for long periods. LTC is great for people who need assistance with Activities of Daily Living (ADLs), which include bathing, eating, getting in or out of bed, dressing and more. These services help individuals live safely and as independently as possible when they can no longer perform many ADLs on their own. According to the U.S. Department of Health & Human Services, 60 percent of people will need some form of LTC. 1 

Retirement Planning & Long-Term Care

Retirement and LTC planning are intertwined, as these are some of retirees’ largest expenses. For people who don’t have a LTC plan in place, their families often deplete their savings to help cover LTC costs. While not everyone will need LTC, it’s important to review the coverage options in the event you need care.

Options to Pay for Long-Term Care

Generally, there are four ways to pay for LTC: government assistance, traditional LTC insurance policies, hybrid policies or personal savings. These options need to be weighed based on your unique financial situation. 

  • Government Assistance – Medicare and/or Medicaid often does not cover all your LTC expenses, mainly due to eligibility requirements to qualify. You also will be left with less control over the type of care you receive because these options only cover limited services and not all facilities accept Medicare and/or Medicaid.
  • Traditional Long-Term Care Insurance Policies – By insuring your LTC policy with an insurance company, you can choose the amount of coverage and how long it lasts. Typically, these policies have you pay an annual premium for life.
  • Hybrid Policies - It's common in 2022 for most insurance companies to move away from traditional policies and offer "hybrid" policies where your LTC insurance is coupled with your life insurance. If you don't end up needing LTC benefits, it can pay a life insurance death benefit to your beneficiary upon your death.
  • Personal Savings – It is common to see individuals and families deplete their personal and retirement savings to pay for unexpected LTC. LTC can be costly, so it brings up the question if your retirement savings can withstand such an undertaking. If you plan, you can preserve your hard-earned savings and use those funds for what they were intended for.

Choosing The Right Solution for You

While LTC planning might seem complicated, it’s there to protect you and your loved ones. Each solution comes with its advantages and disadvantages, so work with your financial advisor to come up with the solution that fits your unique financial plan. We would be happy to discuss how we can help you prepare for the unexpected. Our team always has your best interest in mind to get the cost and coverage that’s appropriate for you and your family. 

  1. gov – What is long-term care and who needs it?