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Long-Term Care Month: Do You Have An LTC Plan?

Long-Term Care Month: Do You Have An LTC Plan?

| November 23, 2019
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When it comes to our money, we know we need to prepare for retirement, plan for major milestones (like paying for your child’s college education or wedding), pay off debt, and make saving a priority. But what about healthcare in retirement? Or, more specifically, long-term care? Are you hoping you have enough saved for the potentially sky-high bills or that a family member will take care of you when you can’t take care of yourself? Trust me on this: you don’t want to leave your future care to chance. 

As November is Long-Term Care Awareness Month, this is the ideal time to start developing your long-term care plan. Here are a few things to think about as well as a few strategies to help you finance this piece of your financial plan. 

1. Will I Need Long-Term Care?

You may not realize it, but nearly 70% of people turning 65 today will need long-term care during their remaining years. (1) Of those, an estimated 20% will need care for 5 or more years, while the average person will need it for one to three years. (2) So there is a good chance that you will need some type of long-term care at some point in your life. 

2. How Much Does Long-Term Care Cost?

It may surprise you to know that Medicare doesn’t cover long-term care expenses, which means you need to come up with the resources on your own. And for some perspective, here’s what you can expect to pay for long-term care:

  • On average, nationally, it costs $8,517 per month for a private room in a nursing home, $4,385 for an in-home health aid, and $4,051 a month in an assisted living facility. (3)
  • Women tend to live longer than men, and they live longer than men under long-term care. The average time women require long-term care is 3.7 years (or around 44 months), which can cost $374,748 in today’s expenses for a private room. (4)
  • For men, who need long-term care for an average of 2.2 years (or around 26 months), they can expect to pay $221,442 for a private room. 

3. Do I Need Specialized Care? 

If you have a family history of or early signs of Alzheimer’s or dementia, or if you suffer from a chronic disease that will require daily assistance, you will need a facility that offers the care you’ll need. You should share your thoughts with your family: Would you prefer to live in a nursing home or would you like nurses and assistants to come to your residence? Do you want a religious community of care? There are several preferences to take into consideration when considering your long-term care plan. 

Having the option to make these choices yourself lends much-needed autonomy to your long-term care plan. If you wait until you need it, you may not be in good enough health to make the decision, or the size of your savings might determine the care you receive. Whether you’re worried about potential health concerns or want to protect your hard-earned wealth, it’s essential to understand the long-term care insurance options available to you and whether or not a policy makes sense for your lifestyle and needs. 

4. Okay, What Are My Long-Term Care Insurance Options?

You saw the numbers above. With costs this high, it’s no wonder that long-term care expenses often result in financial plan failures for 32% of households with a $1 million net worth. (5) And while long-term care coverage isn’t cheap, it pales in comparison to long-term care costs. Here are some options to consider when creating a long-term care strategy. 

A. Traditional Long-Term Care Insurance

With traditional long-term care insurance, you pay a premium in exchange for the potential benefits available if needed. However, if you never need long-term care, you receive no benefits. It’s a “use it or lose it” policy.

Just like any insurance policy, you will have choices to make about the coverage options.

Customized Coverage

You can select the daily benefit the insurance will pay for your care. To choose the right coverage amount, you need to know what the cost of long-term care looks like in your state. For example, a private room at a nursing home in Pennsylvania will cost an average of $10,403 a month, and hiring a home health aide for just eight hours a day could set you back over $53,000 for the year.

Length Of Coverage

You must also decide on the period you want the benefits available. Options range from one to five years or for your lifetime. Logically, the longer the benefit period, the higher the premiums you will need to pay. 

Benefit Stipulations

Your policy will also indicate “benefit triggers” or conditions that must exist to receive benefits from the insurance company. A tax-qualified plan pays benefits when you are unable to perform two of six activities of daily living without substantial assistance for at least 90 days or have a cognitive impairment like Alzheimer’s. Non-tax-qualified plans may have less restrictive benefit triggers.

Inflation And Premiums

You may want your benefits to grow to match the inevitable increase in long-term care costs. Prepare yourself that premiums can also increase as they are not set in stone.

B. Life Insurance With A Long-Term Care Rider

People don’t buy traditional long-term care insurance because they are concerned that if they buy it and don’t use it, they would have wasted their money. Because not being protected causes an even worse sense of regret, the insurance industry has developed several hybrid products. One solution is a life insurance policy with a long-term care rider. The appeal of this product is that if long-term care is needed, the funds are available through your policy’s death benefit. But if you don’t spend the total value, your beneficiaries will still receive the remaining death benefit upon your death, thus no wasted money. 

If you need life insurance, getting your long-term care coverage as a rider may be a good option. This way, someone will be benefiting from the premiums you are paying, whether it is you or your heirs.

C. Annuity With A Long-Term Care Rider

If you don’t need life insurance, another combination product may be better suited to your situation. Some annuities offer the option of adding a long-term care rider to the contract. Since 2010, the IRS allows for the long-term care portion to be used tax-free. (6)

When purchasing the annuity, you would select the amount of long-term care coverage you want, often two to three times the face value of the annuity, as well as the length of time you want coverage. Finally, you can decide to protect your spending power against inflation. 

This option makes money available to you if you need long-term care. Otherwise, you can cash out the annuity when it matures (in which case you would lose your long-term care coverage) or let it accumulate and ultimately pass on the assets to your heirs. 

Obtaining long-term care coverage through an annuity can be appealing because it is generally less expensive than stand-alone insurance, and you can receive coverage without medical underwriting. Annuities tend to be less common than the other choices, though, because of the current low-interest rates and the substantial up-front investment. Plus, annuities are less efficient at transferring wealth than life insurance.

D. Save On Your Own

Consider starting a dedicated investment specifically for future healthcare needs. Create a separate account and contribute a specific amount every month to build a contingency fund for whatever healthcare expenses come your way. If you end up not needing long-term care, the money is still yours and can fund an inheritance for your heirs. 

We Can Help

Statistics show that you’ll likely need long-term care; the question is how you’ll pay for it. No matter how close or far you are from retirement, it’s worth thinking about your long-term care plan. At KeyAMS, we want to help you Master Your Financial Universe by making sure long term care expenses don’t eat away at your nest egg.If you have questions about your options and want to make sure you have the coverage you need, contact us for a free, no-obligation consultation by calling 267-421-8272 or emailing

About David

David Barol is a wealth advisor at Keystone Asset Management Strategies. He specializes in helping clients create a values-based financial strategy that focuses on turning their dreams into achievable goals. David earned his bachelor’s degree in Political and Social Thought from the University of Virginia and became a Master in Public Policy at the John F. Kennedy School at Harvard. He spent many years working in economics consulting and then public finance, making significant contributions to our society, including writing the war risk insurance policy used by the federal government during the Gulf War and creating economic models to measure the impact of infrastructure projects, most notably the project that led to the building of the airport in Hong Kong. To make the world a better place, David ran for public office and has always been involved in his local and regional community. After his political career, David became a financial advisor, since earning his Chartered Life Underwriter (CLU®), Chartered Financial Consultant (ChFC®), Certified Financial Planner™ (CFP®), and Behavioral Finance Advisor (BFA®) designations. To learn more about David, connect with him on LinkedIn.








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