Our team has spent time discussing and emphasizing the importance of planning for the future, and we’ve also examined various methods to achieve successful strategies. Long-term care is a significant component of such planning that calls for thorough and careful preparation.
Long-term care, sometimes abbreviated as LTC, is a broad term to describe an array of personal care and supportive services for the elderly. Not everyone will need the same type of long term care plan; age, gender, lifestyle, family circumstances, health history and medical conditions, and marital status are all factors that will distinguish one person’s LTC costs from another.
A recent survey reveals that the majority of Americans may not be prepared for long-term care. According to a poll from The Associated Press-NORC Center for Public Affairs Research published in May, 67 percent of respondents acknowledged that they have conducted little to no planning for their future LTC needs, while only 10 percent of respondents reported to have planned extensively. The AP-NORC report also notes that the 65+ demographic “is growing at an unprecedented rate. In 2014, there were 46.2 million adults age 65 and older, and this number is expected to more than double to comprise about 98 million older adults by the year 2060.” These revelations, combined with the fact that close to 70% of people who will live beyond the age of 65 will need long-term care of some form, illustrates the importance of discussing this care sooner rather than later.
While there is a great deal of complexity related to individual long-term care needs, there are a number of ways to address the costs. The first key point to understand about funding sources is that Medicare should not be relied upon to cover the majority of costs. While over half of the respondents of the AP-NORC survey are planning to use Medicare for living assistance, Medicare actually covers little of overall LTC costs. The program generally only covers costs of “skilled care,” which are services that need to be performed by a nurse or licensed professional. A LTC plan often includes non-skilled care such as meal preparation, housekeeping and other day-to-day activities, and those services are not covered by Medicare. Medicaid covers a good portion of LTC, but it’s reserved for people with limited income.
In some cases, people may ultimately utilize a combination of funding options to pay for long term care. New England Investment and Retirement Group has previously examined the benefits and risks of these options and we’ve compiled a list of the most common methods.
Among the most popular plans are long-term care insurance and, more recently, hybrid plans. Traditional health insurance often has limitations on LTC that are similar to Medicare. Because of those limits, there are long-term health insurance plans that can cover a variety of expenses including both skilled and non-skilled care as well as therapy (speech, occupational, physical and rehabilitation) at home. In addition to in-home care, LTC insurance can cover expenses of assisted living facilities, hospice care, and nursing homes. A December 2016 report indicates that insurance plans designated for long-term care are declining and are being combined with life insurance plans and annuities as a “hybrid”.
A reverse mortgage, which is a program allowing a homeowner aged 62 or older to use home equity as a source of income, is used to pay for various expenses that could include long-term care. This option can be a complex endeavor due to certain conditions, which include varied interest rates and additional costs associated with the mortgage, as well as the requirement to live in the home and stay current on all property taxes, insurance and other fees associated with the home.
One long-term care management plan that is quite common is the organization of family members to provide care. Families are often well-suited to offer daily support for aging relatives that can be expensive otherwise, and can typically provide more comfortable and simplified living arrangements than at a nursing home or assisted living facility. This option is generally the most affordable and is often a traditional choice for families all over the country.
Regardless of the funding or care options chosen, a comprehensive strategy remains paramount in light of this new data revealing a great number of people who are not taking advantage of making sufficient financial preparations. For people who are unaware of or misinformed about the options available, a discussion with an experienced advisor can be a great place to start in making such intricate arrangements.