It is important to plan for your future care. Most people in their fifties and early sixties don’t want to think about the possibility of needing help bathing, dressing or eating, but 70% of people over the age of 65 require assistance in two or more daily activities or need some type of long-term care. Here are some of the most common options for paying for long term care.
Out Of Pocket
Out of pocket or self-insurance means that you pay for all of your medical bills on your own. Instead of an insurance company paying, you are on the hook for medications, procedures, and long term care. The cost of care can be monumental. The average cost of an assisted living facility is roughly $40,000, almost the same price per year as a home health care aid and the average nursing home is double that at approximately $100,000 a year. The average amount of long-term care needed depends greatly on health. Men tend to need care for only about 4 years or less, while women tend to need just over 4 years of care. With those numbers in mind that brings the cost of self-insurance to well over exceeding a few hundred thousand dollars. Care for those cognitively impaired is the greatest possible cost of all with care being needed for longer amounts of time.
Family Members and Friends
Some believe that their children and grandchildren or family friends will become their caretakers, and this can be great for some families. Your daughter or son may possibly move into your house and take over the household responsibilities and care for you. Or maybe one of your children has an extra bedroom for you to move into and wants to care for you. Something like a friend or family care should be spoken about in advance. There are some programs that will pay your loved ones to learn to care for you.
One obvious downside to asking a family member to become a caretaker or lack of planning otherwise is the stress put onto that person. Sometimes when a family member is taking care of a loved one they start to neglect their own physical and emotional wellbeing. There are a number of variables and factors in being a caretaker that can cause stress and issues for the person.
Only low-income families can qualify for Medicaid. It applies to more than one program. The program within Medicaid for the elderly is called Home and Community based Services or HCBS. Income and assets are always factored in when eligibility is being determined. Medicaid also decides who you get your treatment from, as well as the type of care you receive. Medicaid is not focused on just long-term life care, it has a broad list of people it takes care of. Medicaid also will take control of assets if you pass away, in order to ensure they are repaid; Meaning if you wish to leave something as inheritance for your children, then that may not be possible with Medicaid. If you use Medicaid you should sit down five years before applying for Medicaid because of its “five-year look back” period and talk with a lawyer about protecting what you want to pass down to your heirs. The most common asset taken as payment are homes.
Long Term Life Insurance
There are many different types of Long Term Care product options available for someone to choose from, traditional, hybrid long term care, and life insurance with an accelerated benefits rider. Traditional care has one disadvantage, which is that your premiums are not guaranteed meaning they have the possibility of going up in the future. Most people are lucky enough to not need to use their insurance until they’re much older in life but begin investing in their fifties and sixties. This means that while paying your premium may go up before you ever even use the long term care.
Hybrid long-term care is different from a traditional long-term care package because your premiums and benefits are guaranteed. You have the option to pay your premium overtime or in full once. If you are lucky enough to never use your care then once you pass away everything will be given tax free back to your heirs. Because this is a hybrid plan, even if you use all of your benefits your heirs will still receive a death benefit tax free as well at your death. Hybrid care guarantees you are putting your money somewhere safe that will be there and take care of you when you are in need.
Finally life insurance with an accelerated benefits rider. With a life insurance policy that has an accelerated benefits rider you are able to borrow against the death benefit tax-free in order to cover long term care needs and expenses. After you pass away your heir will receive a tax-free death benefit, even though you borrowed against it.
Everyone ages and with new technology and advances in medical science we are living longer. The older we get the more assistance we are going to require. It pays off to be financially prepared for any outcomes age may bring us. What type of long-term care will you choose?