Prepare for the Real Costs of Long-Term Health Care

I admired active in Africa. I still adulation the agrarian spaces and the live-and-let-live culture. I’ll retire there for sure… my 150-year-old bank cottage is accessible and waiting.

But in my adolescent days, Africa came with a cost: I was far from admired ones. A round-trip admission to the U.S. amount an absolute month’s salary.

But sometimes I anticipation it account it… such as if my baby grandma entered abiding affliction backward in her life.

She was a admirable person; affectionate and gentle, but with a agog eye for extenuative a penny.

Luckily for her, if she bare ceaseless care, a aggregate of complete banking planning and acceptable timing – bloom affliction was a lot cheaper then, and Medicare had acceptable allowances – meant she was abounding for.

Those days, however, are over… are you ready?

Long-Term Care: It’ll Amount You

Consider these numbers:

  • The boilerplate amount of a clandestine allowance in a nursing home is $250 to $350 per day, or about $91,000 to $128,000 per year.
  • The boilerplate amount of assisted active is $3,628 per ages – added than $43,500 per year.
  • A home bloom abettor for eight hours per day costs added than $40,000 per year.

Most humans adapt for abiding affliction by artful how abundant of the amount they could handle with retirement assets and savings, again searching to allowance to ample any gap.

But abiding affliction allowance premiums accept skyrocketed in contempo years.

People are active best with abiding diseases such as Alzheimer’s, like Grandma. And insurers didn’t ahead an continued aeon of low absorption rates, which accept hit their investment allotment on which they depend to pay approaching claims.

Consequently, premiums on abiding affliction allowance accept soared.

In 2000, you could pay $880 per year for a $70 circadian benefit, a 50-day cat-and-mouse period, 5% admixture aggrandizement aegis and lifetime benefits. Today a agnate action – but with a five-year best account aeon – would amount $2,944 per year.

Long-term affliction policyholders face a boxy decision: Pay the added premiums – acid into your retirement savings! – abate coverage, or let the action blooper and lose the benefits.

Get Smart Instead

Fortunately, there are strategies you can accept to cope with these ascent allowance costs. Here are some of the easiest to implement:

  • Buy a accumulated abiding affliction and activity policy. These pay out whether you charge affliction or not, and the premiums are fixed. A 55-year-old man who pays $10,000 per year for 10 years could get a account abiding affliction account of $5,500 for up to six years, growing at 3% circuitous per year. If he didn’t charge abiding care, his brood would accept a $130,000 afterlife benefit, or he could banknote in the action and get aback 80% of his premiums.
  • Add a chronic-care addition to a abiding activity allowance action if you buy it, which lets you use up to 2% of the afterlife account per ages for abiding care, with a $360 circadian maximum. This addition tends to add 10% to 12% to the premiums

The boilerplate abiding affliction affirmation is just beneath than three years. That gives you ambit to acclimatize your action and save on premiums:

Cut aggrandizement protection. Acid aback from 5% to 3% can abate your premiums significantly. The earlier you are now, the bigger this advantage will be. Someone in his or her 70s, for example, may accept already congenital up a big abundant circadian account at 5% aggrandizement aegis that abbreviation the amount to 3% or lower will be abundant in the future.

Reduce the advantage term. If you accept lifetime benefits, you can usually abate advantage to three to 5 years, which covers the boilerplate affirmation period. But be acquainted that the bargain appellation may abatement abbreviate of what you charge if you advance a abiding disease.

Look for a “paid up” option. Regulators in some states crave insurers to action this advantage to policyholders who bead their insurance. Instead of accident all the advantage you paid for, you’d get a account based on the premiums paid.

Of course, there are added means to abate your bloom affliction costs, now and in the future, such as adopted bloom affliction and bloom accumulation accounts.

Don’t Set It and Forget It

Most humans acknowledge bound to changes in the investment environment. They appropriate opportunities and acclimatize their portfolios appropriately as asset ethics change.

Unfortunately, the aforementioned isn’t consistently accurate for insurance. There’s a addiction to buy it and let it ride. Don’t accomplish that mistake.

If you don’t accept abiding affliction insurance, accede accepting it.

If you do, analysis your advantage and see whether it makes added faculty to abate it and alter some of the accumulation into your retirement kitty, area it ability acquire bigger returns.

After all, the approaching of U.S. bloom affliction is added ambiguous than ever… and that’s a anguish you don’t need.

Prepare for the Real Costs of Long-Term Health Care

I loved living in Africa. I still love the wild spaces and the live-and-let-live culture. I’ll retire there for sure… my 150-year-old seaside cottage is ready and waiting.

But in my younger days, Africa came with a cost: I was far from loved ones. A round-trip ticket to the U.S. cost an entire month’s salary.

But sometimes I thought it worth it… such as when my dear grandma entered long-term care late in her life.

She was a lovely person; kind and gentle, but with a keen eye for saving a penny.

Luckily for her, when she needed round-the-clock care, a combination of sound financial planning and good timing – health care was a lot cheaper then, and Medicare had good benefits – meant she was well-provided for.

Those days, however, are over… are you ready?

Long-Term Care: It’ll Cost You

Consider these numbers:

  • The median cost of a private room in a nursing home is $250 to $350 per day, or about $91,000 to $128,000 per year.
  • The median cost of assisted living is $3,628 per month – more than $43,500 per year.
  • A home health aide for eight hours per day costs more than $40,000 per year.

Most people prepare for long-term care by calculating how much of the cost they could handle with retirement income and savings, then looking to insurance to fill any gap.

But long-term care insurance premiums have skyrocketed in recent years.

People are living longer with chronic diseases such as Alzheimer’s, like Grandma. And insurers didn’t anticipate an extended period of low interest rates, which have hit their investment returns on which they depend to pay future claims.

Consequently, premiums on long-term care insurance have soared.

In 2000, you could pay $880 per year for a $70 daily benefit, a 50-day waiting period, 5% compound inflation protection and lifetime benefits. Today a similar policy – but with a five-year maximum benefit period – would cost $2,944 per year.

Long-term care policyholders face a tough decision: Pay the increased premiums – cutting into your retirement savings! – reduce coverage, or let the policy lapse and lose the benefits.

Get Smart Instead

Fortunately, there are strategies you can adopt to cope with these rising insurance costs. Here are some of the easiest to implement:

  • Buy a combined long-term care and life policy. These pay out whether you need care or not, and the premiums are fixed. A 55-year-old man who pays $10,000 per year for 10 years could get a monthly long-term care benefit of $5,500 for up to six years, growing at 3% compounded per year. If he didn’t need long-term care, his heirs would receive a $130,000 death benefit, or he could cash in the policy and get back 80% of his premiums.
  • Add a chronic-care rider to a permanent life insurance policy when you buy it, which lets you use up to 2% of the death benefit per month for long-term care, with a $360 daily maximum. This rider tends to add 10% to 12% to the premiums

The average long-term care claim is just less than three years. That gives you scope to adjust your policy and save on premiums:

Cut inflation protection. Cutting back from 5% to 3% can reduce your premiums significantly. The older you are now, the better this option will be. Someone in his or her 70s, for example, may have already built up a big enough daily benefit at 5% inflation protection that reducing the rate to 3% or lower will be enough in the future.

Reduce the coverage term. If you have lifetime benefits, you can usually reduce coverage to three to five years, which covers the average claim period. But be aware that the reduced term may fall short of what you need if you develop a chronic disease.

Look for a “paid up” option. Regulators in some states require insurers to offer this option to policyholders who drop their insurance. Instead of losing all the coverage you paid for, you’d get a benefit based on the premiums paid.

Of course, there are other ways to reduce your health care costs, now and in the future, such as offshore health care and health savings accounts.

Don’t Set It and Forget It

Most people react quickly to changes in the investment environment. They seize opportunities and adjust their portfolios accordingly as asset values change.

Unfortunately, the same isn’t always true for insurance. There’s a tendency to buy it and let it ride. Don’t make that mistake.

If you don’t have long-term care insurance, consider getting it.

If you do, review your coverage and see whether it makes more sense to reduce it and divert some of the savings into your retirement kitty, where it might earn better returns.

After all, the future of U.S. health care is more uncertain than ever… and that’s a worry you don’t need.

Taking a Hard Look at Long-Term Care Insurance

For many Americans, buying insurance to cover your home, car and health is standard practice. But long-term care insurance is a mystery for many, even though it offers important financial protection against some of life’s uncertainties.

The goal of long-term care (LTC) insurance is to protect the policy owner from footing the entire bill of an extended stay in a healthcare facility, such as a nursing home or rehabilitation center.

Because there’s no telling whether you will need long-term care in the future, and the costs can run very high if you do, it’s worth your while to learn about your long-term care insurance options and make an informed decision.

It’s possible that at some point later in life you may need specialized care. For example, as you get older, your physician may discharge you to a nursing home following a hospitalization for surgery or illness. Fortunately, Medicare will cover qualified stays up to 100 days. Sometimes, however, deteriorating mental or physical health caused by an accident, illness or dementia will lead to an extended stay in a nursing home or ongoing in-home nursing care. When this happens, even families that are in a good financial position may need to balance the expense of long-term care with their other priorities.

While Medicaid will cover long-term care costs after 100 days, this federal program requires individuals to first deplete their personal savings, among other qualifications. For this reason, even individuals who are financially comfortable may want to carefully consider long-term care insurance.

Here are some factors to think about as you consider long-term care insurance:

· Your age and health may affect your eligibility. Purchasing a policy when you’re relatively young and healthy may mean more years of payments, but it also helps you lock in a benefit that may not be available when you’re older or in the event you experience a health issue. The cost of a policy tends to increase with age, particularly after age 60 when health problems start to become more common. If you have a pre-existing condition, or a family history of one, you may not be eligible to purchase certain policies. Carefully review the fine print to see if any conditions are excluded from coverage.

· Long-term care insurance policies come in many forms-from barebones to all the bells and whistles. Price is only one factor to consider. Compare components of the policies side-by-side to see which plan may make sense for you. Evaluate facilities and programs in your area so that you can match your service expectations with what various policies may cover.

· Most plans are tied to the need for assistance with a pre-determined number of activities of daily living (ADLs) such as dressing, showering and eating. You will pay more if you want a policy that requires fewer concurrent ADLs to trigger benefits.

· Consider nursing home costs in your area to determine whether you want to buy coverage on the higher or lower end of the spectrum. Choose a daily benefit – or the amount of expenses covered each day – you can live with, as you will be expected to make up the difference.

· Most plans have an elimination period, which is the amount of time that must elapse before your insurance covers the bill. This “gap” in benefits ranges from 30 to 180 days. You are responsible for 100 percent of the costs before your benefits begin.

· Inflation protection is a common plan rider that can help offset rising costs of care by increasing your eligible lifetime benefits under the plan. It’s worth considering if you can afford the cost of a more generous lifetime limit.

Your financial advisor can help you calculate whether your projected future income and assets can withstand the cost of long-term care if the need arises. If there’s any doubt, a long-term care insurance policy may make sense. Together you can review your options and choose a plan that helps you meet your long-term goals for financial security.