Could Your Retirement Survive the Cost of Long-Term Care?

When most people think about the greatest financial risks facing retirees, the stock market probably comes to mind.

But one of the biggest risks may actually be long-term care.

Many people assume they probably won’t need it. However, depending on how long-term care is defined, somewhere between half and nearly 70% of people turning 65 today will need some form of care during their lifetime.

For many people, long-term care will eventually become part of retirement.

It’s Not Just Whether You’ll Need Care

Most conversations focus on whether someone will need long-term care. The bigger question may be what happens if that care is needed for several years.

While many people require care for a relatively short period, about 22% will need it for more than five years. That is where even a strong financial plan can begin to break down.

The Cost May Be Higher Than You Expect

Nationally, a private nursing home room now averages around $130,000 per year.

For those living in Connecticut and Massachusetts, however, the cost can be significantly higher. Around New Haven, nursing home care can approach $190,000 per year. In parts of Cape Cod, it can exceed $200,000 annually.

These numbers often surprise people because most articles focus on national averages. But the national average may not reflect what care will actually cost where you live.

Is Long-Term Care Insurance the Answer?

Long-term care insurance may be part of the answer, but it usually isn’t the entire answer.

The long-term care insurance market has changed dramatically over the past several decades. Years ago, more than 100 companies offered traditional policies. Today, only a handful remain.

Many existing policyholders have also experienced significant premium increases, while underwriting has become much stricter.

Even if you already own a policy, it is important to understand exactly what it covers:

• How large is the benefit?

• Does the policy include inflation protection?

• How long will the benefits last?

  
  

Having a policy does not necessarily mean all of your long-term care expenses will be covered.

Think Beyond Insurance

That is why it can be helpful to think about long-term care planning—not simply long-term care insurance.

For some people, insurance makes sense. For others, the strategy may involve setting aside dedicated investment assets. Hybrid life insurance policies, state partnership programs or other planning strategies may also be more appropriate.

There is no single solution that works for everyone.

Start Planning Before Care Is Needed

The most important thing is to begin planning before you need care. The earlier you start, the more options you generally have.

Insurance may be easier to qualify for, hybrid policies are typically less expensive, and Medicaid planning strategies often require years of advance preparation.

Waiting until care is needed can dramatically limit your choices.

Long-term care planning is not about predicting whether you will need care. It is about preparing for a possibility that statistics tell us is more likely than many people think.

Retirement planning is not only about growing your assets. It is also about protecting them if life does not go exactly according to plan.

If you would like to review how long-term care fits into your retirement plan, or whether your current strategy is still appropriate, visit caserta-dejongh.com or give us a call to schedule a meeting.

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