The Looming Long-Term Care Shadow: Planning for Your Golden Years

Living longer, healthier lives is undeniably a blessing. Yet, with increased longevity comes the likely reality of needing long-term healthcare. This raises questions about who will provide it and how it will be paid for. While many envision comfortable retirement years, the financial burden of long-term care (LTC) needs can derail even the best-laid plans.

According to the Administration for Community Living (ACL), approximately 69% of people turning 65 today will require some form of long-term care services, with 20% of those needing it for over five years. This same government data reports women receive LTC services for 3.7 years on average, while men average 2.2 years.

Whether it’s in-home assistance, assisted living, or skilled nursing care, the costs can be staggering. Data from Genworth suggests annual median costs for the Johnson City region range from around $50,000 for in-home care and assisted living facilities to around $99,000-105,000 for semi-private and private nursing homes. This same data projects these median annual chronic healthcare costs will increase about 20% by 2030.

How can you manage this risk and safeguard your financial future from a long-term care need?

Self-insuring might be attractive for some. After all, relying on your savings offers flexibility and avoids insurance premiums. Alternatively, there are strategies that may allow you to offload uncertainty and financial risk onto an insurance company.

One such option is to consider a long-term care rider on your life insurance policy. These riders leverage your existing premiums to provide additional coverage for potential long-term care needs. Hybrid life and long-term care policies come with guaranteed, locked-in premiums and access to tax-free LTC benefits if needed. When the LTC benefit pool is not exhausted on a hybrid policy, it functions as life insurance for the designated beneficiaries.

Another option is the traditional tax-qualified long-term care policy. Similar to hybrid policies, these provide tax-free monthly benefits for long-term care services. Additionally, some premiums may be tax-deductible. These policies are guaranteed renewable, which ensures continuous coverage. However, if the insurance carrier is losing money and proves that to the state department by filing a loss ratio, then assuming they get approval, they hold the right to increase premium on traditional LTC across the board. Thus, many like the idea of the hybrid policies which have flat premiums and cover two financial risks in one.

Choosing the right path requires careful consideration. Factors like your family history of needing care, available family support, financial situation, and legacy goals play a vital role. A combination of strategies might be ideal for some, while others may find comfort in a single comprehensive plan.

An important takeaway is to address long-term care planning sooner rather than later. Ignoring this aspect of retirement planning can have unintended consequences. Depending on health status, generally the time to start considering if LTC might be appropriate is age 50 to 65. By taking proactive steps, you can ensure a dignified future for yourself and your loved ones.

Should you have questions or concerns, please feel free to reach out to us. We’re happy to help answer questions that may help you make informed decisions when it comes to your financial future.

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