Long Term Care Insurance serves critical role
in protection of retirement assets |
Most people have worked hard and planned diligently to provide the financial
resources to secure a comfortable and prosperous retirement.
Many also consider leaving at least some portion of these assets
to their children or grandchildren to be an important priority.
But often overlooked in the retirement plan is the need to have protection
from the potentially massive costs of skilled nursing care and personal
health care. Today, one year in a nursing facility could easily exceed $45,0001.
As with most medical procedures, the cost of providing quality Long Term Care (LTC)
is increasing rapidly. Out of pocket payments for these expenses could be disastrous
to a retirement plan that lacks Long Term Care protection.
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What is Long Term Care? |
Long Term Care is the assistance needed if a person develops a chronic impairment
in activities of daily living (eating, dressing, bathing, or toileting) or a cognitive
impairment, such as Alzheimer’s disease. This type of assistance may be provided at
variety of places. Examples where care could be accessed are at home, in an assisted
living setting, a retirement community, a nursing home, or hospice facility.
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Does health insurance, Medicare, or Medicaid back to top
cover the cost of Long Term Care? |
Health insurance plans generally do not extend to the payment of LTC expenses.
Medicare provides only short-term skilled nursing care following hospitalization.
Medicare will also limit at-home care services to those in the process of
rehabilitative therapy and does not cover expenses of those who have extended
impairment in activities of daily living or Alzheimer’s disease. Medicaid is a
federal welfare program designed for the poor that is administered by the state.
While middle-income or upper middle-income individuals may qualify for Medicaid
in order to pay LTC expenses, they must first meet increasingly strict rules
regarding depletion of their income, assets, and savings. In other words,
they must impoverish themselves to meet the criteria to qualify for Medicaid.
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Do I need Long Term Care Insurance? back to top |
Continuing advancements in medical technology, as well as the increasing
desire of Americans to improve their nutritional and physical fitness, will
likely push lifespan expectations beyond that which is seen as average today.
The longer a person lives, the more likely it will be that he or she will
require some level of Long Term Care.
Women, because they generally live longer than men, are almost twice as
likely to need nursing home care after the age of 65. For a couple turning
65, there is a 75% probability that one of them will need Long Term Care2.
Even more disturbing is the financial impact—70% of all single people admitted
to a nursing home go broke within three months, while 50% of all couples are
impoverished within six months after one spouse is admitted2.
The need for Long Term Care is by no means limited to retirees. Reports from
the U.S. Accounting Office indicate that 40% people receiving Long Term Care
are between the ages of 18 to 64. Furthermore, over 40% of all nursing home
residents are aged 65 and younger3.
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How much do Long Term Care services cost? back to top |
- 70% of all single people admitted to a nursing home go broke within 3 months
- 50% of all couples are impoverished within 6 months after one spouse is admitted.
(The Wall Street Journal, June 2000)
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Average LTC cost projections by 2030 back to top
Source: American Council of Life Insurers |
| Today |
2030 |
Nursing Home:
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$45,000 (per year) |
$190,600 |
Assisted Living Facility: |
$25,300 (per year) |
$109,300 |
Home Health Care: |
$61 (per visit) |
$260 |
Adult Day Care: |
$50 (per visit) |
$220 |
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Who is the "Sandwich Generation?"
How do Long Term Care issues affect them?
back to top |
The "Sandwich Generation" is comprised of those individuals who must
care for aging parents while at the same time are raising their own children at home.
This confluence of needed care will involve complex medical, emotional, and financial
issues and those in the middle of the sandwich will be seen as central to the solution.
Generally it is women who assume the primary responsibility for this multigenerational
care. A U.S. government study indicates that the average woman will spend 17 years
raising children and 18 years caring for elderly parents—often not her own4.
In order to provide this care, women may end up paying a high financial cost. Time
off from their jobs would result not only in reduced compensation, but fewer chances
for promotion and reduced retirement income as well5.
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Seven Reasons to Own Long Term Care Insurance
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- Access and choice of quality personal care or skilled care
- Protection of retirement assets for use by spouse or as a legacy to heirs
- Reduces the emotional and financial burden on family members
- Provides options to receive health care at home rather than a nursing facility
- Over 50% of all Americans will need Long Term Care in their lifetime6
- The cost of LTC insurance is significantly less when purchased at a younger and healthier age
- A tax-qualified LTC policy provides benefits that are generally not taxable
as income and has premiums that may be deductible in some cases1
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Without a properly designed Long Term Care policy, a person’s dream of the ideal
life in retirement could be destroyed by the costly need for personal or skilled
care. Other priorities, such as leaving a portion of an estate to provide
financial assistance to children or to educate grandchildren, may be forever
altered.
If you have a trusted insurance advisor, you may wish to ask about your need for
LTC insurance. Since this type of policy requires understanding of the unique
issues involved in developing a plan of this type, you may find it helpful to
consult an advisor with experience in financial planning as well as the health
industry. We would be happy to assist you in finding a specialist in Long Term
Care protection.
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- National Association of Insurance Commissioners (NAIC) Shopper’s Guide
- Wall Street Journal, 6/2000
- Plans, Compensation & Benefits Review, March/April, 1996, p. 50
- CNA Insurance, "LTC Facts"
- Ft. Lauderdale Sun-Sentinel, July 29, 1991, p. 6A
- American’s for LTC Security, 8/1999
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