Long-term care (LTC) is one of the most overlooked parts of financial planning, but it can have a significant impact on your retirement savings and family. As people live longer, the need for care whether at home, in assisted living, or a nursing facility becomes increasingly common.
Here’s a simple breakdown of key concerns and smart solutions.
Common Long-Term Care Concerns:
Rising Costs: According to the AARP report published 3/12/20206, the national average for a private room in a nursing home can exceed $100,000 per year and prices keep climbing. Nursing Home Inflation costs have risen faster than national average with the costs of care rising 4.5% annually since 2005. For more information see: AARP Report Finds Long-Term Care Costs Outpace Income
Family Burden: Without a plan, caregiving often falls to family members, which can lead to emotional, physical, and financial stress.
Medicare Misconceptions: Many people assume Medicare will cover LTC, but it generally doesn’t cover extended stays or personal care assistance.
Medicaid: Generally, you will need to spend your assets down to $2,000 in order to qualify for government assistance ($162,660 is allowed to be kept in joint ownership with spouse)
Depleting Assets: Paying out of pocket can quickly drain retirement savings, affecting your financial security and legacy plans.
Smart Long-Term Care Solutions:
Traditional LTC Insurance: Offers coverage for a range of services but can come with rising premiums and “use-it-or-lose-it” risk. Self-employed individuals can deduct their LTC premium against their taxes (subject to age banded limits).
Hybrid Life + LTC Policies: Combine life insurance with long-term care benefits if you don’t use the LTC coverage, your heirs receive a death benefit. Self-employed individuals can deduct the portion of their premium attributable to the LTC cost against their taxes (subject to age banded limits).
Asset-Based Strategies: Use existing assets (like annuities or life insurance) to fund LTC needs, often with favorable tax treatment.
Health Savings Accounts (HSAs): Tax-advantaged HSAs can be used to pay qualified long-term care expenses, especially helpful in early retirement.
Family Conversations and Legal Planning: Designate healthcare proxies, create care directives, and involve loved ones early to avoid confusion later.
Trust planning: A Medicaid trust may be beneficial because it can help protect assets from being spent down on long-term care while still allowing the individual to qualify for Medicaid benefits. It can also preserve assets for heirs by legally removing them from the applicant’s countable resources after the required look-back period.
Next Steps:
Assess Your Risk: Think about family health history, your lifestyle, and your retirement timeline.
Start Early: LTC planning is most affordable and flexible when done in your 50s or early 60s.
Consult an Advisor: A personalized long-term care strategy can help protect your assets, preserve your independence, and give your family peace of mind.
Addressing long-term care now can help you avoid crisis decisions later and keep your retirement plan strong no matter what the future holds.
Equitable Advisors and its subsidiaries do not provide tax or legal advice. Please consult your tax and legal advisors regarding your particular circumstances.