Financial Planning for Long-Term Care

When it comes to financial planning, long-term care often takes a back seat to more immediate concerns like retirement savings, mortgages, and daily expenses. However, the reality is that when you reach the age of 65, there’s a 70% chance you will end up needing some type of long-term care services.

Financially planning for care in the future is a key part of financial health, one that so many people fail to do. Instead, they or their family members are left scrambling to cover the costs when health issues arise.

Whether you’re looking toward the future or navigating immediate care needs, these practical financial tools and strategies will equip you with the resources you need to ensure a physically and financially healthy outlook.

Understanding the Cost of Care

The first step in planning is understanding the potential costs. Long-term care can include a wide range of services and support, from occasional visits from in-home caregivers to full-time residential nursing care.

According to recent studies, the average cost of in-home care services ranges from $35,000 to $108,000 per year, depending on location and the type of service, and this figure is only expected to rise. Knowing these numbers helps you determine the kind of financial preparation you’ll need.

Health Insurance Options

Unfortunately, Medicare, the federal health insurance program for people who are 65 or older, offers extremely limited long-term care coverage. However, Medicaid, the need-based option, does pay for most long-term care services. But keep in mind that eligibility and benefits can vary by state, and eligibility is determined by your total assets, not your income.

Long-term care insurance is also available to specifically cover these services — but at a high premium. If you’re considering long-term care insurance, it’s important to evaluate the benefits, limitations, insurer’s reputation, and especially any coverage caps to ensure it will actually pay out when you need it.

Life Insurance Benefits

Another option to consider is life insurance policies with long-term care riders, which allow you to use some of the death benefits for long-term care. This can be an effective way to multitask your financial products. But again, these benefits vary by company and policy, so you’ll need to do your homework and make sure you’re signing up for the right type of policy with a reputable company.

Savings and Investment Strategies

Beyond insurance, many people use personal savings and investments to cover long-term care costs. Health savings accounts (HSAs) offer a tax-advantaged way to save money specifically for medical expenses, including long-term care.

You can also utilize retirement savings vehicles like 401ks and IRAs. However, keep in mind that with life expectancy rates continuing to rise, those investments may need to last longer than expected. So if you’re planning to rely on retirement savings to fund any long-term care needs, you may need to contribute more than originally anticipated or reduce other expenses to compensate.

Government Programs

If you’re a veteran, VA benefits cover a wide range of long-term services, including in-home care, nursing homes, and even telehealth visits. However, you will need to meet certain requirements to qualify, and you may have to pay a copay. In addition, if you need placement in a residential facility, your options are limited to VA-run or approved facilities, which often have lengthy waiting lists.

There are also some government and social programs, such as the Program of All-Inclusive Care for the Elderly (PACE), available to assist low-income seniors with their long-term care needs. While these resources can be a lifeline for seniors who need care now, they shouldn’t be a factor in planning for the future. There are no guarantees of approval or even that the programs will still be in place when you need them.

Legal and Estate Planning

Incorporating long-term care into your legal and estate planning can protect your assets and help you qualify for more long-term care assistance options. An estate planning attorney can help you understand how to structure your assets to potentially qualify for Medicaid, which can cover long-term care for those with limited income and assets. Tools like a living will and durable power of attorney for healthcare can also dictate your care preferences if you’re unable to express them yourself.

Other Aspects to Consider

While the financial side of long-term care planning is critical, it’s equally important to acknowledge the emotional and practical aspects. Discussing plans with family, considering your caregiving preferences, and mentally preparing for the potential need for care can be tough, but it’s an essential part of planning for the future.

You can discuss things like managing chronic conditions at home rather than in a residential facility, what your desires are if you’re diagnosed with Alzheimer’s or dementia, and any preemptive plans you’ve made for long-term care. These conversations can help ensure that everyone’s on the same page and that any decisions made reflect your own preferences, as well as the realities of the situation when the time comes.

Right Hand Care’s Affordable Solutions

No one wants to imagine living out their retirement years with limiting or debilitating health struggles, but it’s still vital to plan for that eventuality. From insurance to retirement savings to government programs, there are many different ways you can prepare financially for potential long-term care needs and fund present needs. But the sooner you start preparing, the more peace of mind you can have, knowing that you’re securing a stable, financially healthy future for yourself and your loved ones.

If you’re looking into in-home care options, Right Hand Care offers affordable and compassionate services tailored to each client’s individual needs. We focus on providing quality care that’s accessible to all, ensuring physical health without sacrificing financial health.

For more information on our services or to set up a care plan, contact us today.