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3 Key Considerations for Long-Term Care Planning

long-term care planning

For individuals in their 40s, 50s, and 60s that are currently healthy, it can be hard to imagine a point in the future when they may need to worry about long-term care planning. In addition, the idea of losing autonomy is likely to induce feelings of worry concerning what might occur and its financial ramifications. Due to the uncertainty created by COVID-19, many have realized how important being able to afford quality home care near family members is when constructing an effective financial plan for life ahead.

Long-term care planning is essential to ensuring that long-term care needs can be met cost-effectively and comfortably. Planning early allows individuals to prepare financially, review their options for long-term care, and consider how best to maximize long-term benefits for themselves or a spouse. Taking proactive steps now can help ensure a higher quality of life long-term – so starting long-term care planning is crucial as early as possible. This helps most people feel less stressed about their long-term care needs and allow them more control over their future. The earlier individuals take action, the better off they will be in the long run.

1 – Gauging the Likelihood of Needing Long-Term Care

To better understand the probability of needing long-term care, it is essential to become informed on relevant data. Statistics indicate that approximately half of us will need long term care and thus most should consider some form of long-term care planning during our lives; to be prepared for the possibility. Imagine if you were told there was a 50/50 chance of getting into an accident in the next year – would you choose not to buy auto insurance? We’re not saying everyone should get long-term care insurance, but it’s essential to consider all possible ways to cover your expenses associated with any potential future needs when it comes to long-term care planning.

2 – Long Term Care Planning = Complexity for Couples

When couples consider their own long-term care planning process – it will be a bit more intricate than for individuals. This is because there may be a tendency to think that if one partner requires assistance, the other will provide it. Nevertheless, both partners could need extended care services at once, which exposes them to an increased risk of being unable to look after one another when needed most.

Another factor to consider is that even if one partner remains physically able, providing the necessary level of care may be an overwhelming task. While no specialized skills are needed for activities of daily living, it requires a substantial psychological and emotional commitment from the healthier spouse to take proper care of their disabled partner.

Long-term care planning is not simply about allocating funds or protecting yourself with an insurance product. To truly prepare for long-term needs, savers must contemplate how they want to receive assistance, the kind of service that best fits their requirements and who will be offering it, authorizing family members to assist if needed, and formulating a way to finance these expenses.

Too many individuals falsely believe that traditional insurance is the sole long-term care solution. Consequently, those who deem this option a lousy fit deter from further researching other planning opportunities and thus miss out on all the potential benefits they could gain.

3 – Consider Your Options to Pay for Long-Term Care

Regarding long-term care planning costs, you typically have three ways of paying:

  • Using your savings
  • Taking advantage of government programs
  • Investing in an insurance product

Let’s take a closer look at each avenue.

Personal Savings: Have you set up a retirement plan to adequately cover the extensive expenses of long-term care? The annual cost of long-term care is estimated to range from $50K to $100K per individual – will you have sufficient funds left over for other needs or desired outcomes, such as inheritance for your family and friends? Furthermore, think ahead to when you may require long-term care services and how lengthy the need could be. Women typically require this service for 3.7 years, while men need it on average for 2.2 years. Cognitive decline – like dementia or Alzheimer’s – is a much more significant challenge than physical conditions; accordingly, it might necessitate far more extended attention.

Government Assistance: While Medicare does not provide coverage for long-term care and only offers limited benefits after a hospital stay, Medicaid can be utilized if you meet the financial eligibility requirements. This program is typically accessible to people with low incomes or assets; however, each state decides which facilities offer required care. If you are eligible for Medicaid, the state may attempt to recover its costs associated with your care after death by liquidating assets like the family home and any life insurance policies. If you don’t do your long-term care planning properly, your heirs could receive nothing from this estate while your debts must still be paid.

Long-term Care Insurance: When it comes to safeguarding yourself against long-term care events, there are three main types of insurance you can choose from: a standard long-term care policy, an amalgamated life and long-term care plan, or adding benefits riders to your existing coverage.

Traditional Long-term Care Policy: This form of insurance tends to be pricey, and the costs can increase annually because premiums are not secured. If you decide to cancel it, all your initial payments will be forfeited.

Hybrid Policy: This unique form of insurance provides both life and long-term care coverage. You can choose how much protection you are looking for, whether a one-time payment or spread out over three to ten years. Plus, even if you never use your long-term care benefit, your beneficiaries will still receive the total amount of premiums paid back in tax-free funds from the life insurance portion of this policy. And worry not—even if you need to utilize that particular service, guaranteed money is still coming their way!

Benefits Rider: For those who prioritize the protection and continuity of their legacy, a benefits rider can be an attractive option. This enables you to attach a rider to your current life insurance policy, allowing one to draw from the death benefit without incurring taxation when covering long-term care costs. While this does provide more security in later years, it may also limit what is left for heirs upon passing – though not necessarily at their detriment, depending on individual circumstances.

Resource: Washington State DSHS has a website covering long-term care residential options if you have an immediate need to place a family member of yourself.

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