The baby boomer generation is heading into rough and uncharted waters when it comes to their long-term care needs. By 2020, nearly 55 million Americans will be 65 or older, and life expectancy continues to increase. In recent years, analysts have noted the impact of elder care on the so-called “sandwich generation” – adults who were responsible for their aging parents as well as their own children. With the lengthening of the lifespan, the sandwich generation of the future could well refer to people in their 70s caring for their parents in their 90s, or adults in their working years helping two generations in- above them. With the prospect of serious long-term care needs looming, it is vital for individuals and families to take their personal financial planning seriously and have a plan in place to pay for a long-term care event.
For many families, long-term care insurance (LTCI) can make all the difference. LTCI coverage directly supports the care expenses of the elderly or disabled, in the environment that best meets their wishes and needs. Whether the setting is your home, assisted living or nursing home, LTCI benefits complement other income and assets to minimize the impact of these expenses.
Customer study: LTCI protects the care of 97-year-old great-grandmother
Ruth is a 97-year-old great-grandmother who took out an LTCI policy 18 years ago at the behest of her son. Three years ago, still living independently, she recognized that she needed help with her activities of daily living and moved into an assisted living facility using her LTCI benefits.
Last year she was diagnosed with dementia. She was transferred to the facility’s dementia unit, where she receives 24-hour care and continues to receive LTCI benefits. The current cost of her care is $ 6,900 per month. His LTCI benefit pays $ 150 per day, or $ 4,500 per month, or about 65% of his LTC costs. The remaining $ 2,400 is taken monthly from her Social Security benefits and savings.
Assuming she continues to receive benefits, she will have received $ 216,000 at the end of her four-year benefit period. Now in waiver of premiums, Ruth has paid a total of $ 48,900 in premiums since the inception of the policy. Her LTCI policy allowed her to pay for her care without depleting her savings and without resorting to Medicaid.
Is LTCI a good option for you or your family?
Here are some considerations that should be part of your discussion:
Learn about the realities of long-term care. Ready for sticker shock? The average cost of a private room in a nursing home now exceeds $ 90,000 per year, and the average stay in a nursing home lasts almost three years. Government insurance programs other than Medicaid do not address long term care issues.
Plan ahead – far ahead. LTCI premiums are more affordable when individuals enroll while they are still relatively young and in good health. LTCI buyers in their 40s and 50s can pay thousands of dollars less per year than older buyers, and few companies will write policies for people over 75. Health and family history will also impact the cost of premiums and the availability of coverage.
Take care of mom. Most of us know that women tend to outlive men. Industry statistics show that 71% of new applications come from women. As a result, women’s premiums for LTCI are typically higher than men’s (unlike life insurance, where women typically pay lower premiums). However, the investment is well worth it given the larger potential expense they face. As mentioned above, buying LTCI at a relatively young age can help lower premiums.
Customize a plan to meet your needs. LTCI products are available to meet very specific priorities. Choices abound in terms of amount of coverage, deductibles (commonly known as wait times for eligibility), options to increase benefits that take inflation into account, and specialized shared plans for couples. Insurance advisors often develop plans combined with annuities or life insurance, taking advantage of tax laws for traditional and asset-based plans. These tax benefits can include tax-free LTC benefits and / or a 1035 tax-free swap for asset-based annuity / life plans with an LTC rider.
Obviously, experienced advice is essential to take these factors into account. Buyers should look for insurance professionals with a solid background in LTCI who can fully describe the benefits and limitations of a plan. It makes sense to consult with experts in your community; costs can vary widely depending on geography and these experts will have the best access to accurate and relevant information.
We all need to face the real changes that come with age and think about how best to protect our property and our families. For those with the foresight, ability and commitment to build that protection, LTCI is a proven strategy that works.