Your Plan for Long-Term Care

A pillar of financial planning often ignored—or denied it will ever be needed—is long-term care. Avoidance becomes the planning default because this hard conversation involves talking about debilitating illness, lost income, aging at home or in a facility, etc.—not the most exciting topics. However, planning solutions for those scenarios now allows you to rest at ease every day after.

Long-term care includes a range of services that meets health and everyday personal care needs over an extended period of time. Long-term care plan payouts are almost always combined with personal or government health insurance programs, like Medicaid.

According to the U.S. Department of Health and Human Services, the odds of those who turned 65 in 2018 needing long-term care were 7 in 10—those are pretty good odds. But, according to a study by the Life Insurance Marketing and Research Association, less than 16% of adults have long-term care insurance to pay for that care. Yikes.

Below, two options for paying for long-term care are covered in general terms: long-term care (LTC) insurance and hybrids of life and LTC insurance. Read about them and see if they might be a good fit for your financial plan.

Long-term care insurance

Traditional LTC insurance provides coverage for many types of long-term care benefits. Just like other insurance plans, coverage depends on your policy type. Benefits could include palliative care, hospice care, in-home care, nursing home care, etc. Cost is determined by coverage, how old you are when you buy the policy, and any optional benefits you choose.

If you end up using it, LTC insurance may turn out to be one of your best investments, as the cost of long-running care can quickly outpace retirement savings and standard health care coverage. However, premiums are known to be very high and often out of reach for many American workers.

It can be tough to swallow the idea of paying high premiums for an insurance plan you may never use. The only consolation is that premiums for most classical LTC policies are deductible from taxable income within the limits specified by the IRS.

Hybrids

Hybrid LTC insurance policies include some long-term care coverage and feature fixed premiums, tax-free lifetime benefits, and a death benefit for beneficiaries. In general, hybrid premiums are lower than standard LTC policies, however they will vary based on the insured individual and amount of coverage.

Another hybrid-like option is a separate long-term care rider on a life insurance policy that accelerates the death benefit. Policies with an accelerated death benefit allow tax-free cash advances while you’re still alive, which are subtracted from the amount your beneficiaries receive when you die.

With an asset-based LTC insurance policy, you would deposit a sum of money with the insurance company instead of paying premiums. You then receive interest on this deposit. If you do need care, the insurer pays for those services based on the amount you deposited and how old you were when you purchased the policy. The younger you were, the more benefits you can get for your money. An added bonus is that if you don’t ever use the policy, you can get your deposit back, or your heirs can collect a death benefit.

FlickrYouTubeWordpressFacebook
Equal Housing LenderNational Credit Union Administration
NCUA - Your savings federally insured to at least $250,000 and backed by the full faith and credit of the United States Government. National Credit Union Administration, a U.S. Government agency. Equal Housing Lender - We do business in accordance with the Fair Housing Law and Equal Opportunity Credit Act
Notice of Changes in Temporary NCUA Insurance Covereage for Transaction Accounts - All funds in a \"noninterest-bearing transaction account\" are insured in full by the National Credit Union Administration through December 31, 2012. This temporary unlimited coverage is in addition to, and separate from, the coverage of at least $250,000 available to members under the NCUA's general share insurance rules. The term \"noninterest-bearing transaction account\" includes a traditional share draft account (or demand deposit account) on which the insured credit union pays no interest or dividend. It does not include any transaction account that may earn interest or dividends, a negotiable order of withdrawal (\"NOW\") account, money-market deposit account, and Interest on Lawyers Trust Account (\"IOLTA\"), even if share drafts may be drawn on the account. For more information about temporary NCUA insurance coverage of transaction accounts, visit www.ncua.gov. (2) If an insured credit union uses sweep arrangements, modifies the terms of an account, or takes other actions that result in funds no longer being eligible for full coverage under this section, the insured credit union must notify affected members and clearly advise them, in writing, that such actions will affect their share insurance coverage.