Those turning 65 this year have a 7 in 10 chance of needing long-term care (LTC) at some point.¹ With the cost of a private room in a nursing home now topping $100,000 per year, the thought of paying this — or for a loved one — can be staggering.²

However, the high cost of LTC is no reason to delay creating a care plan. It is important to think through the implications of LTC on retirement plans, the effect that paying for LTC may have on you or your spouse, and options that can defray these costs. Here you will find four steps to consider when thinking about LTC. 

Assess Your Likelihood of Needing Care

As many as 70% of people may need LTC in their lives, which also means that 30% won't. If you are among the minority, your plans may look different than those expecting to need LTC. How many loved ones have required LTC? What does family health history look like? Assessing the likelihood that you will need LTC at some point can inform the rest of the planning process. 

Evaluate LTC Costs  

LTC costs vary widely depending on location, local costs of living, the level of care needed, and the amenities offered. An apartment in an assisted-living community in Pella, Iowa, will likely cost less than a private room in a San Diego nursing home. Some instead opt to stay in their homes and hire private caregivers. By researching and evaluating costs in your area, you will have a better idea of what to expect in the location where you will receive LTC. 

Research Payment Options

Ways to pay for LTC include:

• Private savings
• An LTC insurance policy
• An annuity or pension  
• Medicaid (with asset restrictions)

One of the main complications with LTC occurs when one spouse requires care but the other does not. In order for the spouse needing care to qualify for Medicaid, they must have minimal assets. This situation can leave the other spouse without adequate resources to support themselves. A financial professional can work with married couples to create a plan that allows both spouses to receive the care they need. 

Meanwhile, an annuity or pension can provide regular income to help pay for LTC—sometimes in combination with an LTC insurance policy or payment from retirement savings. Reviewing all options at your disposal can help evaluate future steps.

Create an LTC Fund

Once you have identified your best options for paying for LTC, it is time to create a dedicated LTC fund or track your investments. Having certain funds earmarked for LTC needs ensures they will be there when you need them. 

You may also want to consider investing in LTC insurance, which helps cover the costs of a LTC facility without dipping into personal assets. LTC insurance may not be right for everyone, and coverage varies, so it is important to discuss coverage with your financial professional before committing. 

 

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual Long Term Care insurance, annuity or security. To determine which product(s) or investment(s) may be appropriate for you, consult your financial professional prior to purchasing or investing.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking #1-05313109.

 

Footnotes

¹ How Much Care Will You Need?, Administration for Community Living, https://acl.gov/ltc/basic-needs/how-much-care-will-you-need

² Nursing Home Costs in 2022, SeniorLiving.org, https://www.seniorliving.org/nursing-homes/costs/