It’s hard to ponder your health decline, never mind plan for it. Most people would rather think about the unfettered pursuit of the passions that once took the backseat to work in retirement. However, retirees live longer on average today, so long-term care is a real possibility for most. Designating funds for long-term care is as essential to the Retirement Road Map® as all other aspects when health and vitality are at their peak. Failure to plan for this phase of life can be financially devastating when things are most difficult. Long-term care could involve in-home assistance, an assisted living facility, or a nursing home, all of which come at considerable cost. Incorporating long-term care into your retirement strategy can help you preserve your assets and afford ongoing care if needed.

Understanding Long-Term Care

Perhaps most central to underscoring its relevance is learning what constitutes long-term care. It encompasses a broad range of services and support for health and personal needs over an extended period, safely allowing individuals to maintain some independence when they cannot perform routine activities on their own. Services may include:

• Basic personal assistance (bathing, dressing, meal preparation, etc.)
• Ongoing medical and nursing care
• Home modifications for accessibility
• Transportation alternatives
• Assisted living or nursing home accommodations
  
  

But what is the context of “long-term?” Many are surprised to learn it’s not as long as they thought. Medicare programs cover skilled nursing care up to 100 days after a qualifying hospital stay. Medicaid is income-based. It subsidizes long-term care for those whose assets and income fall below established thresholds or can prove that they have exhausted their savings. Those who do not qualify for Medicaid and need care services longer than 100 days will need a way to fund the expense.

Why Plan for Long-Term Care?

While it may be a drag, one of the best things a saver can do is accept that they may need long-term care and prepare. The U.S. Department of Health and Human Services reported that a person turning 65 has a nearly 70% chance of needing long-term care in their remaining years, yet only a third of middle-income boomers have a plan.  

The cost of long-term care is increasing with inflation and the financial implications are already considerable. In 2023, the national average cost for a year in a nursing home was $116,800, and annual home health aide services cost $75,500.  However, the Federal Reserve estimates that the average retirement savings is only $185,000 for households aged 55-64. Given the average retirement savings, many individuals may face significant financial challenges without a care strategy leading to potential:

• Out-of-pocket expenses
• Tax ramifications on large withdrawals from retirement accounts
• Compromised estate plans from estate recovery programs that require the sale of assets to cover care expenses.
  
  

Establishing a Long-Term Care Strategy

Long-term care planning may be the farthest thing from the mind, especially for those in good health. Making the headspace for a long-term care plan is the first hurdle. Here are some steps to get there:

1. Evaluate Your Needs: Consider, not just the likelihood of needing care but also the amount of coverage you may want using factors such as current health status, gender, medical history, lifestyle, potential health risks, and support system.
2. Understand Care Options and Cost: Investigate long-term care possibilities including in-home care, assisted living facilities, adult day care, and nursing homes. Inquire about the current pricing structure for these options in your retirement area, understanding that costs will likely increase.
3. Consider Long-Term Care (LTC) Insurance: These plans specifically cover the cost of long-term care needs that standard health insurance and Medicare do not. There is a wide variety of alternatives, so weigh them carefully. Assess your budget, assets, the practicality of affording coverage, and when it makes the most sense for you to take on the expense of securing a policy.
4. Build a Financial Plan: Consult a financial advisor to help create a Retirement Road Map® that includes a long-term care strategy. Income streams, investments such as health savings accounts (HSAs) earmarked for healthcare expenses, and solutions for minimizing tax burden will factor into this plan. Furthermore, estate and legacy planning to complete essential legal documents and establish power of attorney, a living will, and a healthcare proxy can be part of this process.
5. Communicate with Family: Frank, open dialogue about your wishes and goals surrounding your healthcare is important for setting expectations and game-planning.
   
   

Securing Long-Term Care Insurance

As likely as it is for an individual to need long-term care at some point, it’s also probable that they will need to supplement the cost. There are several ways to cover the expense of long-term care, including savings, income from liquidating assets, HSAs, and LTC insurance. However, many struggle with whether to buy an LTC insurance policy and when.

LTC insurance premiums can vary based on several factors, including gender, health, pre-existing conditions and can increase with age. 

While today may not be the day to purchase a policy, starting the conversation early gives time for thoughtful planning with family and a financial advisor. At SHP Financial, we specialize in creating the SHP Retirement Road Map® tailored specifically for each client incorporating a plan for long-term care expenses. Contact us today for a complimentary review of your finances and see if adding in a long-term care strategy fits into your plan.

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