By David Thatcher, CFP®
Seventy percent of people turning 65 can expect to use some form of long-term care during their lives. With those kinds of odds, most people take it for granted that they will too. What they forget to consider, though, is how they are going to pay for it. Many people mistakenly believe that they can depend on Medicare or Medicaid to cover long-term care expenses.
Medicare only covers long-term care for short periods of time, such as rehabilitation after an injury or illness. It does not cover the kind of care that most elderly need to maintain their independence. Skilled nursing care is not covered by Medicare. Medicaid will only cover nursing home care if your income is below a certain low level and you’ve depleted nearly all of your savings.
If insurance doesn’t cover long-term care, then the costs will come straight out of your pocket. What kind of costs are we talking about? The most basic kind of care, homemaker services, runs about $3,800 a month on average. The most expensive care, a private room in a skilled nursing facility, averages about $7,700 a month.
Those are national averages. Costs vary greatly depending on the state and county you live in. You can look up the 2016 average costs for your area here.
If your nest egg won’t be able to withstand the costs of long-term care, what can you do? Since most people can’t afford to self-insure, it’s important to plan ahead. With traditional long-term care insurance, you pay a premium in exchange for the ability to receive benefits if they are needed.
A long-term care insurance policy provides you with money to pay for qualified long-term care costs only if they are incurred. If you never need long-term care, then you receive no benefits; it is a “use-it-or-lose-it” policy.
When you purchase your policy, you choose the level of insurance you want and the length of time you want benefits paid. You select the daily benefit amount for care in a nursing home and whether or not you need home care coverage as well. It is important to know the costs of long-term care services in order to elect suitable coverage amounts for your area.
Your policy will also indicate “benefit triggers,” or conditions which must exist in order to receive benefits from the insurance company. These are important to understand. Also, you can have your benefits increase with inflation to match future care costs. One important thing to remember is that premiums can increase, they are not usually fixed.
Long-term care is such an important consideration that you may feel it is too much to figure out on your own. At Cypress Wealth Services, we can help review your long-term care options or current policy to make sure you have the coverage you need. Call us at 866.888.6563 for a complimentary consultation. We are happy to answer any questions you have and help ensure that you will have long-term care coverage when you need it.
About Cypress Wealth Services
Cypress Wealth Services, an independent RIA firm providing financial planning and investment management to high net worth individuals, families, business owners, and institutions. CWS is comprised of professionals with diverse backgrounds and extensive experience and qualifications. CWS is uniquely qualified to serve a broad range of client needs. Their experience and expertise act as a foundation for their client service process, The Second Growth, which focuses on efficiently protecting, growing, and transferring to their loved ones the wealth and legacy a person has already built. With offices in Palm Desert, and Anchorage, the firm serves clients across the country. Learn more by visiting www.CypressWS.com.