A broken hip, a sudden stroke, memory loss—none of us like to think of a future in which we’re laid off or need long-term care, but sticking our heads in the sand won’t pay the whopping bills. According to the U.S. Department of Health and Human Services, if you turn 65 today, there’s a 75 percent chance you’ll need long-term care at some point in your life.
“As hard as it is, this is part of a conversation we have every day with our clients,” says Claudia Rodriguez, a financial adviser with Edward Jones in Traverse City. “It’s a conversation ideally to have in your 40s into the 50s.” Why so soon? Because one of the most common methods of funding, long-term care insurance, looks at issues of insurability just like health and life insurance would. And, as Rodriguez points out, “We are all just one doctor’s appointment away from a diagnosis that can render us uninsurable.”
Rodriguez notes, however, that long-term care insurance is just one of three major options you should have on your radar.
The first is a DIY approach, using savings and other funds and investments to set aside an amount large enough to cover extended care. But you’ll need to be disciplined—a private room in a full-care facility can run about $100,000 a year, and even recovery from something like a cardiac event or broken hip can bleed savings dry in just a matter of months.
The next option is long-term-care specific coverage which, Rodriguez points out, many seniors overlook because options in the past used to be expensive, with constantly escalating premiums. These products have changed dramatically in recent years. “It’s a better type of option than it used to be in terms of costs and coverage,” she says. “Now you can funnel a lump sum of your retirement up front. You may not have gains on it, but for some policies you are even guaranteed to get your premium back.”
The third option is a hybrid product; a permanent life insurance policy to which you can attach a rider for chronic or long-term care needs. “It’s something you’re buying into that’s going to get used regardless to protect your assets,” Rodriguez says. “To me that’s one of the best case scenarios and it can create extra wealth for your heirs, or you can tap into it. Permanent life and care policies are dependent upon your age and health. We start having that conversation even with clients in their 30s. It locks them in at better rates and we can supplement them with term insurance for 10- to 20-year needs.”
One thing she cautions clients about it not to rely on Medicaid/Medicare. Medicaid requires you to spend down your assets to $2,000 plus your home, and Medicare doesn’t cover longterm care at all (anything after 30 days).
Having the conversations that help sort out these choices isn’t easy, Rodrigues says, but definitely sit down and face the tough stuff. Even if you feel like you’ve missed the window to save or are hard to insure, there are products, companies and tactics she and other financial planners work with that can create a safety net plan. “And I tell clients that the best thing to do is utilize what you do have—get a strong estate plan, have all your wills and a trust set up so you don’t put your family through probate, have all your beneficiaries properly set up, preplan your funeral—if something were to happen today these are the things you can do so they’re not having to deal with all those things.”