Long Term Care Planning

Long term care planning is an integral part of retirement planning. While most retirees focus on the early years in retirement (opportunities for hobbies and travel, a second home and grandchildren), it is the later years of retirement that are the most challenging for planning.

Nearly half of all Americans will need some form of long term care – medical and non-medical services required for an extended period of time. Long term care, whether at home, in assisted living or in a nursing home is expensive. National figures show home health care (2007) costing $204 a day for an 8 hour shift ($74,460 a year); assisted living averaging $89 a day ($32,573 a year); and nursing homes charging $205 a day ($74,806 annually). (Source: Genworth Financial 2007 “Cost of Care Survey”) Figures for Rhode Island are slightly above average, while costs in Massachusetts are substantially higher and Florida varies by location.

StrategicPoint recommends that all clients have a Long Term Care Plan. The most popular plan includes Long Term Care Insurance (more on that in a minute) but the plan can include other options. While mapping out a strategy, it is most important to remember that insufficient planning can be an emotional and financial burden for families.

So what are your options? There are four resources for financing long term care: personal assets, insurance, family/friends and Medicaid.

Medicaid is helpful to those who have limited assets, which can be spent down, and who do not have someone dependent upon them for financial security. Self insuring is also an option. If you have sufficient assets (potentially several million dollars) and have carefully planned your retirement spending needs, you may be able to fund LTC out of your investment portfolio. Alternatively, you can sell your vacation home or an investment property in anticipation of a LTC need. In a pinch, you might even consider giving up your home and moving in with your children/ a friend – reserving the proceeds of your residence for long term care expenses. All of these options require foregoing assets or turning to others for assistance.

The most direct solution is to purchase Long Term Care Insurance. The insurance increases your control over an uncertain future and provides peace of mind for your family. You protect your assets and, at the same time, pass along the risk of financial loss to an insurance company.

Most hesitancy over purchasing long term care insurance revolves around costs and complexity. However, it is important to remember that it takes many years of paying premiums to cover the daily cost of at-home-care or a nursing home for only one year.

Long term care insurance policies are complicated and do require an understanding of the various benefit options before purchasing. And, since not all long term care insurance companies are equal in terms of reliability and claims processing, selecting an insurance company with strong financials and a solid servicing track record is a critical part of the process. That is why it is very important to work with a knowledgeable, dependable insurance producer, who can present your options in understandable terms, and work with you to find a product that best fits your potential long term care needs.

StrategicPoint Working with You

All clients should review annually their Long Term Care Plan with their Advisor. If you are interested in purchasing Long Term Care insurance and have not already done so, we would be happy to arrange a consultation with our insurance producer, Paul Isenberg of Long Term Care Insurance Advisors.