Should You Plan for Long-Term Care Insurance? The Answer Is Yes.
Americans turning 65 have about a 50/50 chance of needing long-term care in their lifetime, according to a 2022 Department of Health and Human Services report.*
Given those odds, it’s wise to plan for how you will pay for long-term care in case you need it. The price can be high. The average cost for those needing paid long-term care after age 65 is $245,400, HHS estimates.
Medicare doesn’t pay for extended long-term care, and many retirees rely on unpaid care from family members. If family is not an option for you or you want to relieve them of this responsibility, here are ways to finance your care:
4 Ways To Pay for Long-Term Care Insurance
1. Income and Assets
It may be possible to pay long-term care bills with your pension, Social Security, and other income, and assets. You may also be able to tap the equity in your house through a reverse mortgage to pay for a home health aide for yourself or a spouse’s nursing home care. Be aware that you’ll need to repay the loan with interest once you move out of the house.
2. Long-Term Care Insurance
Coverage typically begins when you can no longer perform certain daily activities, such as dressing, eating, or bathing. Policies limit how much they pay out per day and over your lifetime.
A good time to buy a policy is in your 50s or early 60s, when premiums may be more affordable if you haven’t developed health problems that would exclude you from coverage.
3. Hybrid Insurance
This combines long-term care and life insurance benefits. The policy will help pay long-term care bills, such as residential care. But if it turns out you need little or no care, your beneficiaries will receive a life insurance benefit.
4. Medicaid
This federal and state program will pay for long-term care for individuals with few assets, often as little as $2,000, who have depleted much of their savings. Eligibility rules vary by state.
* “Long-Term Services and Supports for Older Americans: Risks and Financing,” U.S. Department of Health and Human Services, 2022.
MissionSquare does not offer specific tax, insurance, or legal advice. The information presented here is for educational purposes only and is not to be construed or relied upon as investment advice. It is recommended that individuals consult with their personal finance advisor prior to implementing any financial or tax strategy.