You’re probably aware of the risk posed to retirees by long-term care, which is extended assistance with daily living activities such as eating, mobility and bathing. Long-term care is often provided either in a facility or in the home, and it is usually very costly.
AARP recently published a report on the current state of long-term care. Specifically, it ranked each state by the quality and affordability of care available to seniors. While the scores and information vary by state, there is some information that’s applicable to all retirees, regardless of where they live.
According to AARP, more than half of all people turning 65 today will require long-term care at some point in the future. The report also estimates that care provided in a nursing home can cost more than $90,000 per year, while in-home care costs north of $30,000 annually.1
Care is often required for years, so that level of expense can have a big impact on a retirement. Over time, the costs can become a major drain on your assets. Consider that long-term care usually isn’t covered by Medicare, and it’s easy to see the importance of planning for this risk.
The good news is there are steps you can take today to minimize your exposure to long-term care risks. Below are three strategies you may want to consider. If you haven’t planned for long-term care, now may be the time to do so.
Use a health savings account.
Do you have a health savings account? Also known as HSAs, these accounts can be powerful savings tools not only for long-term care, but for all medical costs in retirement.
HSAs have a unique tax treatment. Your HSA contributions are made with pretax dollars, which lowers your current taxable income. You then allocate your contributions to investments according to your goals and risk tolerance. All growth inside the account is tax-deferred. Then you can withdraw the funds tax-free as long as the money is used for qualified medical expenses.
The good news is that many expenses count as qualified costs, including long-term care. You can use your HSA to pay for nursing home costs, to pay an in-home health aide or even to modify your home to accommodate a wheelchair or other equipment. If you have access to an HSA, you may want to consider maximizing your contributions.
Explore long-term care insurance.
Long-term care insurance can be an innovative and effective way to minimize financial risk associated with extended care. When you buy a long-term care policy, you pay premiums to an insurance company. Then, when you need care, the company pays some or all of the costs based on the terms of your policy.
Many long-term care policies cover care in facilities or in your home, as well as home modifications. Some also have a death benefit component. That means if you don’t use the policy, you can leave some of the benefit to your spouse or other loved ones.
Include your family in the conversation.
Perhaps the most important planning step is to talk about long-term care with your family. Discuss the very real possibility of needing care, and ways in which the family could provide support. Perhaps your kids can help out. Or maybe they can facilitate transportation and other services. You may have a wide network of support that you don’t even know about. However, you need to have the conversation to tap into that network.
Ready to develop your long-term care strategy? Let’s talk about it. Contact us today at MasterPlan Retirement Consultants. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.
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Investment advisory services offered through MasterPlan Retirement Consultants, Inc. a Registered Investment Advisor in the state of Georgia. Insurance products & services offered through Fricks and Associates, Inc. MasterPlan Retirement Consultants, Inc. & Fricks and Associates, Inc are affiliated companies.
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