How Will You Pay for Long-Term Care?

Approaching retirement? If so, you may be thinking about how you'll manage and avoid major financial risks.

Lars Larsen ChFC®
Financial Planner in Burlingame, CA

August 1, 2018

The biggest risk you may face is the need for long-term care. Long-term care is extended assistance with basic daily activities such as eating, bathing and mobility. It’s often provided either in an assisted living facility or in the home by family members or home health aides.

According to the U.S. Department of Health and Human Services, long-term care will be a reality for many seniors. The department found that today’s 65-year-olds have a 70 percent chance of needing long-term care at some point. The care is usually needed for a few years, but nearly 20 percent of those who need care require it for five years or more.1

As you might expect, long-term care can be financially challenging. If you don’t have a plan in place, you may struggle to get the care you need. Below are three strategies you can use to fund your future long-term care needs. A financial professional can help you develop and implement a plan.

Self Pay

You always have the option of using your savings to pay for long-term care costs. This strategy could deplete your assets, though. In fact, if you need the care over several years, it may be impossible to fund it completely out of pocket.

A recent Genworth study found that the average monthly cost for a room in an assisted living facility is $3,750. In-home care isn’t much more affordable. The average monthly cost for an in-home aide is more than $4,000.2

Consider that you may need these services for several years. It’s easy to see how the expenses could become a drain on your assets. Even if you have a significant amount saved for retirement, it may be wise to consider alternative long-term care funding strategies.

Medicare and Medicaid

Many retirees assume that Medicare will cover all of their health costs, but that assumption is usually incorrect. Medicare is a valuable resource for retirees, but it usually doesn’t cover long-term care. It will partially cover care while you recover from a medical procedure, but it won’t pay for ongoing assistance with day-to-day activities.

Medicaid does cover long-term care, but this protection comes with a catch. In order to qualify for Medicaid, you must have little income and few assets. This means you may have to spend most of your own money before Medicaid will kick in and cover the rest.

Long-Term Care Insurance

Long-term care insurance is a popular funding strategy because of its flexibility. You pay premiums to an insurance company and, in return, the policy pays for some or all of your long-term care costs in the future. The terms and amount of coverage depend on your specific policy.

You can usually use long-term care insurance to cover assistance provided either in your home or in a facility. Some policies will also provide coverage for home modifications, safety improvements and medical equipment. In fact, long-term care insurance could help you stay in your home longer rather than move into a facility.

Long-term Care Hybrids

An additional option besides long-term care insurance is a lesser-known alternative, commonly referred to as Long-term Care Hybrids. The general concept is rather than paying for insurance only, a Hybrid plan will typically offer some form of benefit to your heirs. There are many types, options and variations of this plan available, so working with a skilled professional can help you determine which option and plan is right for you and your needs.

Ready to develop your long-term care funding strategy? Let’s talk about it. Contact us today at Heritage Financial North. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.


Advisory Services Offered Through Change Path LLC, a Registered Investment Advisor. Heritage Financial North and Change Path LLC are not affiliated.

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