Long Term Care Planning Options
Long Term Care Planning
Planning ahead for possible long term care needs is a critical part of retirement planning. Critical because long term care costs can be tremendously expensive and thus devastating to an estate.
And it’s not just today’s costs one has to consider but also what inflation will do to these costs over time. A $250,000 long term care bill today will likely be $500,000 in 15 years (assuming a 5% annual compound increase in the cost of care).
Options To Pay For Long Term Care
- Pay for Long Term Care Out of Pocket – For example, the 65 year old who has $500,000 set aside to pay for long term care needs may have adequately planned for long term care. This of course assumes they don’t plan on passing this money on to their heirs. If they do want to pass money on to their heirs then they can consider an annuity with a long term care insurance rider or a traditional long term care insurance policy.
- Rely on Your Family Members for Care – If your family members are medically trained and have the time and energy to provide hands-on care this may be an option. It’s important to be realistic about how taxing it is to be a caregiver and the impact it can have on their life, spouse and children.
- Rely on Medicaid (often referred to as welfare) – This person may not have much in the way of assets or income and may have to ultimately rely on Medicaid to pay for any nursing home care they may need. It’s worth noting that Medicaid does not pay for most home care.
- Purchase Long Term Care Insurance – This may be the right option if you have assets to protect and can afford paying long term care insurance premiums. It is necessary to health qualify for long term care insurance so get insured while you’re still enjoying good health. Your money pays for your long term care insurance but your health is what really buys it. Also, premiums are less expensive at younger ages so it’s not too soon if you’re in your early 50’s.