Planning for Long Term Care Expenses

Long-term care is a critical aspect of retirement income planning that many couples overlook.

While no one wants to think about the possibility of needing long-term care, it's essential to plan for this possibility to ensure that both spouses are adequately prepared.

Long term care in retirement income planning

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Here are some steps that couples can take to plan for the uncertainty of long-term care needs:

Educate Yourself

The first step in planning for long-term care is to educate yourself about the different types of care available, the associated costs, and how it is paid for. Long-term care can include a variety of services, such as home health care, adult day care, assisted living facilities, and nursing homes. Understanding the different options and their costs can help you make informed decisions about your long-term care needs. Genworth has an amazing tool that shows the cost of care in each state, and even differentiates based on the various levels and types of care. You can access that tool here.

Discuss Your Options

Once you have a good understanding of the different types of long-term care available, you and your spouse should discuss your options and preferences. Consider your current health status, family history, and lifestyle when making these decisions.

4 Ways To Pay for Long Term Care

There are several different types of hybrid retirement strategies, and the right one will depend on a person's financial situation, goals, and interests. Here are a few examples:

1. Self Pay

Choose to pay for any care needs out of pocket or from your investment assets and/or spend down those assets until Medicaid begins to pick up the tab.

2. Buy traditional long term care insurance

Purchased as a ‘dollars per day’ benefit for a specific period of time, the policy will provide much needed funds to pay for care after a qualifying period is reached.

3. Link long term care benefits to a life insurance policy

Specially-designed policies allow you to spend the death benefit during your life for long term care costs. Any remaining benefits pass to beneficiaries at death.

4. Link long term care benefits to an income annuity

Certain annuities have a benefit that results in a doubling of the guaranteed annual income available should you qualify for long term care.

Which option or options to choose is a very personal choice. Factors include the amount of savings you have accumulated, nature of retirement income sources, family and medical history, appetite for managing risk, and emotional factors.

Review Your Estate Plan

As part of your long-term care planning, you should review your estate plan to ensure that it addresses your long-term care needs. This may include updating your will, establishing a trust, and designating a power of attorney for health care and finances.

Seek Professional Advice

Planning for long-term care can be complex, and it's essential to seek professional advice to ensure that you make informed decisions. A financial planner who collaborates with an elder law attorney can help you evaluate your options and create a long-term care plan that meets your needs.

Regularly Reevaluate Your Plan

As your circumstances change, it's essential to regularly reevaluate your long-term care plan to ensure that it continues to meet your needs. This may include reviewing your insurance coverage, updating your estate plan, and making adjustments to your savings and investment strategies.

What To Do Next

Planning for the uncertainty of long term care needs is an essential aspect of retirement planning for couples. By educating yourself, discussing your options, considering long-term care insurance and other funding sources, reviewing your estate plan, seeking professional advice, and regularly reevaluating your plan, you can help ensure that you and your spouse are prepared for any long term care needs that may arise.

Planning for long term care is a very nuanced and complex endeavor. The cost of care has risen significantly and is poised to continue to grow. Because of this, seeking professional counsel is imperative. And as much as it seems that there is a definitive right answer out there for everyone, the best we can do is plan for as many potential outcomes as possible, knowing that the future is very uncertain, and we won’t know until looking back in hindsight whether the plan was optimum. That said, to simply hope everything turns out okay isn’t a plan at all, so there may be some work to do to ensure you’ve done your best.