Retirement is a time for people to relax and enjoy the things they weren’t able to do while they were working. Traveling, hobbies, spending more time with friends and family—these are the things most people plan to do during their retirement.
Unfortunately, retirement planning also requires one to consider some of the less pleasant realities of aging. Studies from the U.S. Department of Health and Human Services show that 70 percent of people age 65 and older will need some form of long-term care.1 Additionally, for people 65 and older, there’s a 1 in 4 chance they will need long-term care provided in an assisted living or nursing home facility.2
Long-term care in a facility can be expensive. If you’re nearing your retirement, now may be the time to consider how you will fund such care. By planning ahead, you may have more healthcare funding options available. Below are three things you may want to think about as you consider how you could pay for long-term care in a facility:
It’s possible to pay for assisted living or nursing home expenses with your own personal funds, but this option is probably only available to people with significant wealth. According to a Genworth study, assisted living care can cost $3,700 per month, while nursing home care can average $7,700 a month.3 Your retirement might last for decades, and using your own funds to pay for this care can use up your savings faster than you planned for.
This can be especially problematic if you need care but your spouse is relatively healthy. Many retirees require this kind of care in the final years of their life. If you drain your assets to pay for care and then pass away, your spouse may have few resources to fund the remaining years of his or her life.
Medicare or Medicaid
While Medicare does not cover the cost of assisted living or nursing home care, Medicaid does. To use Medicaid to pay for this care, however, you must meet certain financial requirements. For instance, to qualify for coverage under Medicaid, you have to have very little income and few assets.
Many retirees will use Medicaid as a backup option after they have spent down most of their individual assets. Medicaid does allow you to set aside some assets for your spouse, so it is possible to use Medicaid without spending everything. A financial consultant who is knowledgeable about Medicaid can help you develop a strategy.
Long-Term Care Insurance
If you’re concerned about paying for assisted living or nursing home care, you may want to consider long-term care insurance. This type of insurance lets you pay premiums now and, in exchange, the insurance company will cover some or all of the expenses. There are many different types of long-term care insurance, and it can often be customized to meet your specific needs and budget.
Long-term care insurance does require underwriting, so it might be a good idea to look into the option while you are still healthy. Also, consider that most long-term care insurance policies can be used to cover in-home care. In that sense, this type of insurance may actually help you stay in your home rather than transition into a facility.
Ready to develop a long-term care funding strategy? Let’s talk about it. Contact us at Foote Financial Group for more information. We welcome the chance to help you analyze any remaining questions and develop a strategy. Let’s start the conversation today.
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