It’s National Long-term Care Awareness Month, so it’s the perfect time to discuss the importance of preparing for the potential need for care.
Financial planning can be a complex process, especially for those looking for a comprehensive plan that accounts for every aspect of their life. That comprehensive plan traditionally includes budgeting, investing, tax-mitigation, estate planning, and as you get closer to retirement, should even include Medicare and Social Security. One aspect that often goes overlooked, however, is planning for long-term care. Let’s go over why it’s important to include long-term care planning as part of your holistic financial plan.
It Can Help You Preserve Your Hard-Earned Assets [1,2,3]
The unfortunate reality is that seven in 10 of today’s 65-year-olds will need some type of long-term care, and 20% will need it for longer than five years. When long-term care can cost more than $100,000 per year for a private room in a nursing home, it’s easy to see how even a short-term stay has the potential to be costly to a financial plan. Preparing early for the possibility of needing long-term care can help you take a more structured approach to managing future care expenses, potentially reducing the need for urgent financial adjustments.
It’s Not Covered by Medicare 
A common misconception is that long-term care or extended stays in assisted living or nursing home facilities are covered by Medicare. It does cover some stays in skilled nursing care if, for example, a medical condition has necessitated that level of service; however, long-term stays are typically categorized as non-medical expenses. As such, even with a carefully chosen Medicare or Medicare Advantage plan, there could be limitations for long-term care needs. This highlights the value of exploring additional financial strategies to prepare for potential long-term care expenses. Note that this is general information only. It is recommended that you consult with an experienced Medicare planning professional or contact Medicare directly for detailed coverage options.
It May be Able to Extend Your Independent Lifestyle
Planning for long-term care is about so much more than just the care itself. It’s about giving yourself the opportunity to make life-altering decisions in any scenario. A clearly defined plan to pay for long-term care can help you retain your agency and decision-making power, even if you’re no longer capable of living on your own. While this is a potential benefit of long-term care planning, outcomes vary based on individual circumstances. It can also be helpful to know that you have a plan in place in the event of the worst, potentially giving you confidence and saving you from the stress that can come with having to make a decision and arrange for your care at the last possible moment.
You Can Shoulder the Burden for Loved Ones
Just as your plan is about more than the care itself, your plan is also about more than you. Creating a comprehensive plan which outlines your care preferences and financial strategies for potential long-term care needs can be a proactive step. Such planning might assist your family in navigating decisions more effectively, potentially reducing the emotional and financial strain associated with urgent or unexpected care needs. However, it’s important to recognize that each individual’s situation is unique, and the effectiveness of any plan can vary based on personal circumstances. Additionally, a plan can give your family the same assurance it gives you, as they can potentially gain confidence that you’ll be in capable hands should you need high-level care for an extended period.
You May Prepare to Access Care
Early financial planning may provide more options for managing long-term care needs, though it’s important to note that each person’s situation is unique, and the impact of planning may differ. While planning can help in exploring different care options, such as at-home care or nursing facilities, and potentially aid in financial preparation, it doesn’t guarantee specific levels of care or event facility availability. We encourage thoughtful planning to explore potential strategies for funding long-term care, recognizing that each individual’s needs and capabilities are unique. While approach aims to support informed decision-making, but it’s important to note that it does not eliminate the complexities and uncertainties associated with long-term care arrangements and costs.
There Are Modern Options to Pay for It
Modern times have brought about innovative solutions to pay for long-term care. Traditional long-term care policies still exist, offering coverage that may or may not be utilized, but now, long-term care insurance can be integrated with other types of insurance products, such as permanent life insurance policies, to combine benefits. Such integration can address concerns related to traditional long-term care policies, potentially offering more flexibility in policy utilization. The cash value portion of the hybrid policy that is protected and guaranteed by the claims-paying ability of the issuing insurance carrier can be used to pay for long-term care if you need it or as a death benefit for your beneficiaries if you don’t. As with any insurance product, these policies have their own intricacies, fees, and charges, so it’s important to work with a financial advisor to understand your options and see if one of these hybrid policies matches your goals.