7 Ways to Plan for Long-Term Care Costs in Your State

You might not like the idea.  You might try to deny the idea.  You might convince yourself that you will be the lucky one to stay healthy until your last day. However, at least 70 percent of people over age 65 will require some form of long-term care services and support during their lives, new research shows.

Many of us will need long term care, but few of us will be able to afford it.

“Unfortunately, the price of long-term care has gone up enormously over the last 20 years,” says Bill Driscoll, a certified financial planner (CFP) with Plymouth, Massachusetts-based William Driscoll Insurance, Inc. “It seems to be slowing down a bit, but it’s a problem. Very few people have the ability to self-insure [to cover those costs].”

Driscoll has been in the financial services industry for more than 20 years. He’s been offering long-term care insurance as part of his financial planning practice for 18 years.

To reflect the rising costs of long-term care, the recommended amount of insurance coverage is also increasing.

“When I first started offering long-term care insurance, I typically offered a policy of $100 a day, thinking that would cover more than 75% of the cost of care,” Driscoll said. “Today, I generally encourage people to look at [policies of] well over $200 a day, and in some cases $300.”

The increasing need for long term care and assisted living services–and the rising costs of these services–can put some Americans in a tough position during retirement. But it may be easier for some people to pay for long-term care than others, depending on where they live.

Some States Have More Expensive Services Than Others

Each year, Genworth tallies the costs of long-term care by each state. In general, its report has consistently found that year-over-year, not all states are equal when it comes to the costs of care. In fact, these costs can vary dramatically nationwide.

According to the Genworth study, in 2019, the average annual cost for homemaker services in the U.S. was $51,480. For a home health aide, the average annual cost was $52,642. For adult day healthcare, the average annual cost was $19,500. For an assisted living facility, the average annual cost was $48, 612. For a nursing home facility, the average annual cost was $90,155.

Here are the top ten most expensive states for long-term healthcare in 2019 according to Genworth’s study:

  1. Alaska
  2. Massachusetts
  3. Washington, D.C.
  4. Connecticut
  5. Hawaii
  6. Vermont
  7. New Jersey
  8. New York
  9. Nevada
  10. North Dakota

How You Can Plan for Long Term Care Costs

Given the data, it’s clear that long-term care costs could easily devastate your retirement nest egg if they aren’t accounted for and planned into the budget.

Here are some ways you can plan ahead:

1. Buy a Long-Term Care Insurance Policy

Unlike traditional health insurance, long-term care insurance is designed to cover long-term services and supports, including personal and custodial care in a variety of settings such as your home, a community organization, or another facility, according to the U.S. Department of Health and Human Services.

Buying a long-term care insurance policy is one way to plan for the costs of care down the road.

“I had a really tough case in which I did a retirement analysis for a couple, and they were fine if nothing happened, but if anything happened to their health, it would’ve been tragic,” says Andy Tate, a certified financial planner with Minneapolis-based Tate & Setterlund. “They wouldn’t have been able to retire.”

The couple opted for a long-term care insurance policy to protect themselves from those devastating costs.

“Six months later, [one of them] got diagnosed with brain cancer. … That really changed my view on long-term care insurance,” Tate says. “So many insurance agents sell it as a product, but in reality, it should be integrated into the financial plan.”

2. Start Planning While You are Young and Healthy

For certified financial planner Therese Nicklas, with Braintree, Massachusetts-based U.S. Wealth Management, the product is better defined as “lifestyle insurance.”

“No matter how good the nursing home is, most people do not have a goal of landing in one,” says Nicklas, whose mother is in a nursing home. “Planning can be a combination of transferring the cost to an insurance policy and savings. Having a well-crafted policy and starting while you are young and healthy–preferably under age 60–will offer benefits not available through any current means.”

3. Explore Other Financial Products as a Better Way to Cover Long-Term Care Costs

While long-term care insurance may be a great fit for some, others may not be eligible for coverage.

There are a number of pre-existing conditions that make it nearly impossible to qualify for a long-term care insurance policy. Among them are:

  • Alzheimer’s, dementia or memory loss
  • Cystic Fibrosis
  • Parkinson’s Disease
  • Schizophrenia

Furthermore, the coverage may be prohibitively expensive for many.

Other options include:

Health Savings Account

An HSA is similar to a personal savings account, but the money in it is used to pay for healthcare expenses.

Annuity With a Long-Term Care Rider

These are single premium fixed annuities with a long-term care feature designed to cover those expenses

A Deferred Lifetime Annuity

You can estimate the age at which you might need long term care and purchase a lifetime annuity to begin at that time.  If you are sick, then the income can be used to cover your care costs.  If you are healthy, then it can serve as bonus income to enhance your quality of life.

Life Insurance With a Long-Term Care Rider

This product is a combination of life insurance and long-term care insurance, with the advantage that benefits will always be paid, whether you need long-term care or not.

Traditional savings accounts also work, but building up enough of a nest egg to cover what could be upward of $200,000 in expenses each year may prove to be difficult.

Whatever the case, it’s important you do your homework first.

“Understanding the benefits and options available will help you get the most out of your purchase,” Nicklas says.

4. Talk to Family About Your Care

Many families rely on each other for long term care.  The reality though is that this can be financially and emotionally difficult for the caregiver.

5. Draw Down Resources Until You Qualify for Medicaid

Medicare does not cover most long term care costs.  The most common solution for funding long term care is to use up your resources and then qualify for Medicaid.  This can be an acceptable solution, but the quality of care afforded by Medicaid is likely to be less than you desire.

6. Rely on a Trusted Source

If you’re not sure what product would best address your future needs, consult a professional.

“Before buying, get a referral from a trusted resource to someone that specializes in long-term care planning,” Nicklas says.

Start planning for your future by contacting a financial planner today.

7. Calculate Your Overall Retirement Plan and Assess Long Term Care Budgeting

A good retirement calculator can help you assess your ability to fund long term care and weigh the pros and cons of your different options.

The NewRetirement Retirement Calculator automatically assesses when you might require care and estimates those costs.  You can also try different scenarios for funding care.  What does your plan look like with an annuity? With long term care insurance?

NewRetirement Planner

Do it yourself retirement planning: easy, comprehensive, reliable

NewRetirement Planner

Take financial wellness into your own hands and do it yourself retirement planning: easy, comprehensive, reliable.

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