Long Term Health Care Planning: keep more of what you worked for

Planning for your senior years needs to begin while you are still employed, and preferably, long before you reach middle age. The four major considerations for your planning are your retirement—for which you should begin saving with your very first job—health insurance, final expense/estate planning, and long term care planning.

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Whether or not people plan the way they should, most are at least aware of the first three issues. However, neglecting to plan for the strong likelihood of eventually needing extended care (meaning care at home or in a nursing home for one or more years) can significantly disrupt both your retirement planning and your final expense planning. Many people mistakenly think that Medicare or Medicaid will pay the bill if they should ever need extended care. Thanks, however, to organizations like AARP and various Long Term Care organizations, seniors are beginning to realize that failing to plan for Long Term Care can bring dire consequences to their loved ones.

Retirement income should actually be the first step in planning for retirement, if only because it is the one element most within your control. You may not be able to control your company’s group health insurance, and you certainly cannot control changes that take place every year in the Medicare system, but even if you do not work for a company that offers a nice pension, you can open a Roth IRA or traditional IRA as soon as you have employment. Even a modest amount saved—as little as $100 a month from your early 20s—can lead to a retirement savings worth over a million dollars. That sounds like a lot of money, and if planned properly can go a long way in keeping you comfortable during retirement. A million dollars, paid out at the rate of $50,000 a year, would last 20 years even if there were no additional growth. Most seniors live on much less than $50,000 a year. However, if one partner needed nursing home care—even at today’s rates—you would be looking at an average expense of $76,000 per year in addition to the living expenses required by the person who stayed home.

The nursing home expense alone drops the stretch of the million to only 13 years—assuming the funds were used for nothing else. Of course, that’s also discounting interest crediting of the remaining funds. (We are also ignoring funds that we hope will be available from Social Security as no one knows how that fund is going to survive the baby boomers.) 

Actually, our numbers are overly optimistic because many retirees have much less than a million dollars. Retirement rollovers closer to $3 or $400,000 are much more common. A $400,000 retirement would pay for only 5 years in a nursing home at today’s rates—leaving nothing for the spouse at home.

Due to advances in medicine and technology, people are living well into their 80's and 90's, but quality of life often declines quickly and radically.  Age related ailments such as Alzheimer’s Disease are increasing far more rapidly than heart disease, resulting in an annually increasing need for extended coverage for millions of people. Medicare and group insurance will not pay the bill; families forced to shoulder the burden suffer financially, physically, and emotionally.

If you need care and have no plans for paying for it, your first step will be to “spend down” your assets. Once your assets reach a certain level, you will be able to apply for Medicaid, in return for signing over your property and your life insurance to the state. It is an unnecessary trauma, and one that the government in recent years has taken some creative steps to alleviate, primarily through the passage of the Partnership Bill. This is a law that protects a person’s assets up to the value of their Long Term Care Insurance, providing they have purchased such a policy. One by one, states have been passing their own variations of the Partnership Bill; as of 2007, 17 states have approved a partnership bill and 10 more have the necessary training and other procedures in place for passage of the bill. Eventually it is expected to become law nationwide, giving people little excuse for impoverishing their families with an extended care expense.

Long Term Care Insurance—sometimes called "nursing home insurance"—can provide years of coverage, sparing your family much heartache and expense. It is also very affordable when you are in your early 50's or even into your 60s. Contact a reputable agent today who will help you complete this important aspect of your senior planning.

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