When it comes to paying for long-term care costs, there are many sources of funding to consider and use according to a recent article in Retirement Daily by Ken Waltzer.
What are those sources? Well, for many it likely includes a mix of assets and products.
For instance, it might include financial assets, which, Waltzer says, is largest source of long-term care funding, particularly for individuals with significant assets.
Another asset is the equity in your home. According to Waltzer, your home is an exempt asset for Medicaid purposes in most states, sometimes enabling the non-institutionalized spouse to continue living there while the other lives in a nursing home paid for by Medicaid.
You might also consider buying a long-term care insurance policy or a hybrid – an annuity or life insurance with a long-term care insurance rider.
How Much Can Long-Term Care Insurance Cost?
According to the American Association for Long-Term Care Insurance (AALTCI) a single male, age 55 can expect to pay $2,050 per year while a single female, age 55, can expect to pay $2,700. And a couple, both age 55 can expect to pay $3,050. That gets you a pool of benefits equal to $164,000 each at age 55 and the value of benefits when the policyholder reaches age 85 equals $386,500 each. For a couple, both age 60 the combined cost is $3,400. That gets you an initial pool of benefits equal to $164,000 (each at age 60). And the value of benefits when policyholder reaches age 85 equals $343,000 each.
You might also consider a second-to-die life insurance policy, according to Waltzer. In this scenario, long-term care costs are paid out of liquid assets, while the life insurance pays out to heirs when the second spouse dies. Other options, for some, might include a health savings account, veteran’s benefits.
For his part, Waltzer says it’s buyer beware when it comes to long-term care insurance. “These policies can be expensive, especially if purchased when you are older, and premium increases on the order of 40% or more are not uncommon,” he wrote.
The Bottom Line
Long-term care costs can be substantial, but if planned for and managed intelligently, don’t need to bankrupt or frighten you. They can be calmly viewed and just another contingent expense that lends itself to thorough advance planning.
If you want to plan for and manage intelligently your long-term costs, consider a subscription to Retirement Daily, which provides articles and commentary to help you plan for and live in retirement. Get more information and sign up for a free trial subscription to TheStreet’s Retirement Daily.