Does Your Retirement Plan Include Long-Term Care Coverage?

Alano D. Massi, MBA, CFP®
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This is one of the most important subjects I discuss with my Clients as their financial planner and retirement planner. Before recommending any course of action as to whether Long-Term Care (LTC) is appropriate, I always run a comprehensive insurance-needs analysis with the goal of determining the right amount of coverage needed, if any, before exploring any policy options.

LTC serves to support personal care necessities. In addition to medical care, LTC provides assistance with the basic personal tasks of everyday life, or Activities of Daily Living (ADLs), including:

  • Bathing
  • Dressing
  • Using the toilet
  • Transferring to or from bed or chair
  • Caring for incontinence
  • Eating

LTC services can also assist with everyday tasks, or Instrumental Activities of Daily Living (IADLs), including:

  • Housework
  • Managing money
  • Taking medication
  • Preparing and cleaning up after meals
  • Shopping for groceries or clothes
  • Using the telephone or other communication devices
  • Caring for pets
  • Responding to emergency alerts such as fire alarms

The following is according to the U.S. Department of Health & Human Services from the office of the Assistant Secretary for Planning and Evaluation (ASPE):

  • “Most Americans underestimate the risk of developing a disability and needing long-term services and supports (LTSS). Using microsimulation modeling, we estimate that about half (52%) of Americans turning 65 today will develop a disability serious enough to require LTSS, although most will need assistance for less than two years. About one in seven adults, however, will have a disability for more than five years. On average, an American turning 65 today will incur $138,000 in future LTSS costs, which could be financed by setting aside $70,000 today. Families will pay about half of the costs themselves out-of-pocket, with the rest covered by public programs and private insurance. While most people with LTSS needs will spend relatively little on their care, about one in six (17%) will spend at least $100,000 out-of-pocket for future LTSS.”

A few other facts associated with LTC:

  • Someone turning age 65 today has almost a 70% chance of needing some type of LTC in their remaining years.
  • Women typically need care longer (3.7 years) than men (2.2 years).
  • Over 65 million people in the US were unpaid family caregivers to an adult or child. About two-thirds are women.
  • Medicare only pays for LTC if you require skilled services or rehabilitative care. It does not pay for non-skilled assistance with ADLs, which make up the majority of LTC services.
  • Medicaid does pay for the largest share of LTC services, but your income must fall below a certain level and you must meet minimum state eligibility requirements to qualify.
  • Most employer-sponsored or private health insurance only cover the same kinds of limited services as Medicare. If they do cover LTC, it is usually only for skilled, short-term, medically necessary care.

While the cost of LTC coverage can certainly present challenges to a financial plan, there are options we are happy to discuss with you that may assist in funding your premiums. As an example, it could be worth exploring the potential benefits of utilizing a reverse mortgage and available life insurance options. Contact us for a no-obligation consultation so we can listen to your situation and concerns.