How Financial Planning Can Help Prepare for Long-Term Care Costs

Long term care planning

With the cost of long-term care (LTC) increasing year over year, considering how the costs of long-term LTC will impact your financial plan is essential. According to insurance company Genworth, the price of LTC services increased substantially in 2021 for specific settings due to the supply of professional labor and the growing aging society. Other findings from Genworth’s 2021 Cost of Care Survey include:

  • Assisted living facility rates increased by 4.65% to an annual national median cost of $54,000 per year.
  • The cost of a home health aide, which includes “hands-on” personal assistance with activities such as bathing, dressing, and eating, has increased 12.5% to an annual median cost of $61,776.
  • Homemaker services, which include assistance with “hands-off” tasks such as cooking, cleaning, and running errands, have increased 10.64% to an annual median cost of $59,488.
  • The national annual median cost of a semi-private room in a skilled nursing facility rose to $94,900, an increase of 1.96%, while the cost of a private room in a nursing home increased 2.41% to $108,405.

Source: 2021 Cost of Care Survey, Genworth.

You can use personal savings to pay for LTC, but once your retirement savings deplete, other assets such as a home and personal belongings will need to liquidate to pay for care. Family members may be required to pay a portion of your care, depending on the laws in your state, if you have no assets to do so.

During financial planning, it is essential to see the comparison of self-funding the cost of LTC at 100% versus LTC insurance premium outlays over time. Once you have insight into how your retirement savings may deplete paying for care, you may want to purchase LTC insurance to help ensure your cost of care is covered. Here are three ways to help make the cost of LTC more affordable:

Purchase an LTC insurance policy

LTC insurance helps cover care costs for a chronic medical condition, disability, or disorder. LTC policies reimburse for the cost of care in these settings:

  • Your home.
  • A nursing home.
  • An assisted living facility.
  • An adult day care center.

Purchase a hybrid LTC insurance policy

LTC hybrid insurance combines LTC and life insurance into one policy. Here’s additional information about hybrid-LTC policies to consider:

  • LTC hybrid policies integrate life and long-term care insurance into one policy
  • If the LTC insurance is not needed, the life insurance death benefit passes to heirs.
  • LTC/Life hybrid policies may cover long-term care needs for both spouses, depending on the policy type
  • LTC hybrid policies may have an unlimited benefit period as part of a rider; if the individual qualifies, they will receive benefits for the rest of their life.

Health Savings Accounts (HSAs)

HSAs enable people with high-deductible insurance plans to save pre-tax dollars for future medical expenses, which can include LTC if a licensed doctor certifies that:

  • The individual is unable to perform at least two activities of daily living, for example, bathing and dressing without assistance
  • The individual has a cognitive impairment that threatens their health or safety and requires supervision.

Source: Care.com

We can help

Trajan Wealth can help you plan for the costs of long-term care. We can help you understand how your retirement savings and other assets may be impacted by private paying for care or how LTC insurance can help. We can also provide you with resources to compare the costs of in-home care or an LTC facility in your area. Call us today and schedule an appointment!

*Advisory services offered through Trajan Wealth, L.L.C., an SEC registered investment advisor.

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