If you’re approaching retirement, now is the time to review your financial plan to ensure your future long-term care needs have been considered. Assuming Medicare will cover the cost can lead to a burden of bills. A forward-thinking mindset and awareness go a long way in creating a well-rounded financial plan.
We realize thinking about a nursing home or in-home care isn’t one of the idyllic points of retirement, but it’s a reality you need to prepare for. Creating the plan today can ease the stress associated with these life transitions and their associated financial implications.
Defining Long-Term Care
One common point of misconception related to long-term care benefits is the technical difference between skilled care and non-skilled care. Skilled care is prescribed by a doctor and is often associated with rehabilitation, certain memory care services, and recovery from a specific ailment.
Non-skilled care services and Activities of Daily Living (ADLs) include bathing, dressing, medication management, and meal preparation. These tasks fall under personal care or custodial care. While commonly necessary for aging adults, these needs are categorically different when it comes to any type of policy covering long-term care.
Estimate Your Needs
Recent studies show the average annual cost for long-term care hovers over $100k per year across the US. In Delaware, the average monthly cost is $12,699 for a private room in a long-term care facility. The same review suggests annual costs could increase by 30% over the next 10 years.
Of course, care facilities vary greatly when it comes to amenities and location, but these trends and estimates are a great starting point when determining your own possible needs. Overall health, personal wishes, and family dynamics play a large role in the form of care individuals will require.
Covering The Cost
While a few months in a nursing facility may be easily covered by your retirement savings, years of care add up to a large sum. We’ve outlined the primary options for covering the cost.
Long-Term Care Insurance
You can buy an insurance policy specific to long-term care. These policies can cover both skilled and non-skilled care. Others choose to add a long-term care rider to a life insurance policy. The rider allows you to access a portion of your death benefits while still living.
Like any insurance policy, long-term care insurance comes with a monthly premium and policies vary in cost and coverage. Your monthly retirement income and health are factors to consider when determining if long-term care insurance is right for you.
Medicare
Medicare Part A, hospital insurance, does include skilled care coverage, but the duration of the coverage is limited.
If skilled care is specifically prescribed, Medicare will pay for your first 20 days of care. Day’s 21-100 come with a daily coinsurance of $185.50 (current 2021 rate). This 80-day span would cost $14,840. Medicare does not provide any financial support after day 100. At this point, the recipient is liable to pay 100% of the cost.
While you can’t rely on Medicare for extended long-term care needs, Medicare does still cover medical supplies and doctor visits during this time.
Investment Savings
Beyond these coverage options, many will rely on their retirement savings to cover their needs. Withdrawing from a savings account, cashing in stocks and bonds, or annuity payments are a few examples of the mediums you can review to save for your future long-term care needs.
Create A Plan
Armed with an overview of costs and an awareness of coverage possibilities, you can begin reviewing your policies and calculating your own estimated needs.
While there is no one-size-fits-all recommendation, the Integrated Wealth Management team is fully capable of providing a plan specific to your needs and desires upon a full review of your finances. We’re here to guide you through the retirement transition through financial, investment, and tax advisory services. If retirement is on the horizon, reach out for a free consultation.