Many people will end up needing assistance to care for themselves, as they become elderly and that help may not be provided by their children. It might be wise to look into long-term care costs now, according to The Detroit News in “What to know about aging and long-term care costs.”
Here’s what often happens:
Medicare doesn’t pay for long-term care. Medicare does not cover what it terms “custodial” care. For most Americans, who have a median of $126,000 in retirement savings, that’s an immediate financial wipeout. They will end up on Medicaid, the government health program that pays for about half of all nursing home and custodial care.
Those who live alone, are in poor health, or have chronic conditions are more likely than others to need long term care. For women, there are special risks, since statistically women outlive husbands and may not have anyone to provide them with unpaid care.
Everyone approaching retirement needs a plan. The options are:
Long-term care insurance. The average annual premium for a 55-year-old couple was $3,050 in 2019. The older you are, the higher the cost, and if you have chronic conditions, you may not qualify.
Hybrid long-term care insurance. Life insurance or annuities with long-term care benefits now outsell traditional long-term care insurance by a rate of about four to one. This requires committing a large sum of money up front but is a way to obtain long-term care insurance.
Home equity. Selling a home to pay for nursing home care is not the best solution. However, it may be the only solution, particularly if it’s the only asset. Reverse mortgages may be an option.
Contingency reserve. A wealthy family with assets may simply earmark some assets for long-term care, setting aside a certain amount of money in an investment that can be liquidated without penalty.
Spending down to Medicaid. People with little or no retirement savings could end up depending on Medicaid. There are ways to protect assets for spouses, but it requires working with an elder law estate planning attorney in advance.
Reference: The Detroit News (June 10, 2019) “What to know about aging and long-term care costs”
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