We are fielding more and more questions about long-term care insurance, which is in line with what studies show as the number one concern of retirees. You don’t have to do a lot of research or follow a lot of news to know that the costs of care have been increasing significantly over the last couple of years. So if this is a concern of yours, consider these five financial planning tips when planning for long-term care, in order to find the right approach for you:
1) The best defense is a good offense. In this case, your best bet is to start saving early to help build your retirement nest egg so that you have the money to cover an insurance plan that can help defray the potential costs of care later in life. To be clear, contrary to popular belief, Medicare does not provide long-term insurance. So without supplemental insurance plans, an individual must use their personal expenses before receiving government funding like Medicaid.
2) Decide when to begin coverage. What comes first, the chicken or the egg? When you’re young and healthy, perhaps you feel there is time to wait before paying premiums for coverage you hope to never use. But if you wait too long and start to have health issues, insurance companies may perceive you as “at risk” and be less willing to offer coverage. We suggest you err on the side of caution. Consider getting coverage when you’re a spring chicken.
3) Consider your net worth. When planning for long-term care, first consider your net worth. In general, if you have between $200,000 and $2 million in assets, it’s worth investing in long-term care insurance. Less than this amount may limit your options and force you to rely on government entitlement programs. If your assets exceed $2 million, insurance may be optional – you can likely afford to personally fund your future care. These aren’t hard and fast numbers, but should provide a gauge for you.
4) Define your intent. Are you trying to protect your estate or looking to guarantee your basic needs? The options you choose will depend on your resources and goals. Some products provide life insurance coverage as well as can be used for care costs. Others offer premium refunds if you change your mind. As a general rule, we suggest flexible plans that provide a cushion to your personal finances that can help you better manage your long-term care needs.
5) Do your research: Not all long-term care providers are equal and many carriers no longer offer products. So first, make sure you’re picking a financially stable and reputable company. Then, determine what you need and what you can afford.
Planning for long-term care can be a complicated and uncomfortable process, but with proper consideration, you can take the steps necessary to protect yourself and your assets during retirement. As always, we are here to help align your personal values, vision and wealth and can help you consider an affordable plan for your future.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
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