A Guide to Planning Ahead for Long-Term Care

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No one wants to need long-term care, but it’s important to plan for it, as 52.3 percent of Americans age 65 or older will require assistance at some point in their lives. In fact, long-term care costs topped $225 billion in 2015, and that number is only expected to increase.

While Medicare is invaluable for many seniors, it provides little coverage when it comes to assisted living or nursing home care. Depending on the circumstance, it will cover care in a long-term hospital, nursing care within a skilled nursing facility, hospice, and eligible home services; however, long-term (or custodial) care isn’t generally covered.

What Is Long-Term Care?

This type of care covers a range of services and support that people need to meet their basic personal care needs. This care can take place in their homes if they’re aging in place or they’ve moved to an assisted living or nursing home.

It’s often not medical care but rather care that’s associated with everyday life tasks, including bathing, dressing, toileting, incontinence care, transferring to/from a bed or chair, and eating. Other long-term care services may include activities associated with daily living, like housework, money and medication management, meal prep and clean-up, grocery and clothes shopping, pet care, and using communication devices.

The Best Time to Get Long-Term Care Insurance

You can buy long-term care insurance while you’re still in good health. Those premiums are lower to start, although they do increase over time. According to the American Association for Long-Term Care Insurance, the best age to apply is in your mid-50s. 

If you’re in good health, you’ll get a discount — and it’s locked in, which means should your health decline, you won’t lose the discount. Sixty-two percent of people who qualify for good health discounts are between the age of 40 and 49; 46 percent of applicants between the ages of 50 and 59 qualify, and only 38 percent of applicants aged 60 to 69 qualify for that discount.

Premiums are based on your age when you apply, and costs increase 2 to 4 percent a year on your birthday (in your 50s) and jump to 6- to 8-percent increases once you hit your 60s. 

Getting Your Finances in Order

While Medicare won’t pay for most long-term care services and leave you the burden with paying for anything not covered by a public or private insurance program, Medicaid does cover expenses, but there are some major caveats, including an income below a certain level and your ability to meet your state’s eligibility requirements. 

There are other ways besides long-term care insurance to fund your future needs. For instance, you can self-insure — an uncomplicated but often difficult savings method that depends on your ability to put enough money aside to pay for the costs yourself. Since the average cost of long-term care tops $130,000 in many parts of the country, it may not be realistic to consider this option.

You can also sell your life insurance policy to get a cash payout. If you choose a life settlement — an option only available to women age 74 and older and to men age 70 and older — the value may be taxed, but it doesn’t require health screenings. 

You can choose a viatical settlement, but only if you have a life expectancy of two years or fewer or are chronically ill. Should you choose this option, your policy won’t pay a death benefit to your heirs, and viatical companies approve fewer than 50 percent of applicants.

Other Options

If you’re older or you have an elderly relative who’s moving to a nursing or assisted living home, it may be too cost prohibitive to purchase long-term care insurance. Besides selling an insurance policy, you could consider a reverse mortgage, but do your research carefully, as there are pros and cons to paying for long-term care in this manner.

Long-term care expenses are unpredictable. They can range from nothing to hundreds of thousands of dollars or more. Because the odds are higher that you or an elderly loved one will require some kind of care, planning to manage these possible expenses — while a potentially difficult discussion — is absolutely worth having.