Financial Security and Elderly Care: Is Wealth Enough for Future Health Care Needs?
In the realm of retirement planning, a critical yet often overlooked aspect is long-term care (LTC) planning. A recent study, the Caregiver Health Effects Study, revealed that caregiving can take a toll on one's health, with spouses under stress being 63% more likely to die over a four-year period compared to those who aren't caregiving [1]. This underscores the importance of LTC plans or insurance for financially secure retirees.
The high costs of extended care, which are typically not covered by Medicare and traditional health insurance, can quickly deplete even substantial savings. LTC insurance serves as a safety net, helping to fill these coverage gaps and safeguarding retirement assets from being drained by expenses like nursing homes, in-home care, or assisted living, which can cost tens of thousands to over $100,000 annually [2].
Asset-based options, such as LTC benefits built into life insurance or annuity contracts, combine long-term care protection with other financial products, offering several advantages. These hybrid policies, for instance, allow the death benefit to be used for LTC expenses if needed, and if care is never required, the full death benefit goes to heirs [3]. This mitigates the "use it or lose it" drawback of traditional LTC insurance.
Moreover, these hybrid products offer guaranteed premiums and tend to be easier to qualify for than traditional LTC insurance [3]. Some plans also accumulate cash value that policyholders can borrow against or withdraw if they cancel, providing financial flexibility [2]. Annuities with LTC riders offer increased payouts during periods when LTC is needed, while also providing guaranteed lifetime income streams, useful for retirees who want both income security and LTC protection in one product [3].
By opting for LTC insurance or asset-based hybrid products, retirees can preserve their wealth, manage the high and uncertain costs of care, and reduce reliance on potentially incomplete government programs [1][2][3]. These strategies also allow retirees to maintain flexibility and inheritance potential.
The importance of LTC planning extends beyond financial considerations. For instance, fifty-three million Americans are unpaid caregivers, and a care plan, whether self-funded or insured, doesn't just protect assets. It protects your kids' health, relationships, and future [4].
In conclusion, as more retirees face the prospect of long-term care needs, it is essential to consider LTC plans or LTC insurance as part of a comprehensive retirement strategy. A good adviser can help you understand today's and tomorrow's care costs, assess your personal risk, and explore whether traditional or asset-based coverage fits your goals.
[1] The Caregiver Health Effects Study: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6231164/ [2] Kiplinger: Long-Term Care Insurance: https://www.kiplinger.com/article/insurance/T036-C000-S002-long-term-care-insurance.html [3] Forbes: Hybrid Long-Term Care Insurance: https://www.forbes.com/sites/nextavenue/2019/03/15/hybrid-long-term-care-insurance-combines-life-insurance-and-ltc-protection/?sh=6e8d348d4f2b [4] AARP: Caregiving in the U.S.: https://www.aarp.org/content/dam/aarp/ppi/2015/caregiving-in-the-united-states.pdf [5] Investopedia: Long-Term Care Insurance: https://www.investopedia.com/terms/l/long-term-care-insurance.asp
Science reveals that extended care costs, not usually covered by Medicare or traditional health insurance, can significantly impact personal-finance and deplete savings [2][5]. Health-and-wellness experts stress the importance of incorporating long-term care (LTC) insurance into a comprehensive financial plan like personal-finance, as it functions as a safety net to safeguard retirement assets from LTC expenses [1][3].
