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It’s not easy to think about becoming so ill you can no longer take care of yourself, but as with many difficult topics, a little planning today can make a big difference should an unfortunate event occur.

The High Cost of Long-Term Care

Seven out of 10 Americans—70%—will require long-term care at some point in their lives, and that care can be expensive.1 In fact, the national median cost for long-term care, including nursing homes, in-home health care services and assisted living facilities, ranged from $64,200 to $116,796 in 2023.2 At the high end, that expense can drain an individual’s retirement savings in just a few short years.

When planning for retirement, you may wish to consider investing in long-term care insurance to help provide peace of mind for you and your loved ones. Two of the most common methods of securing benefits for extended care include a stand-alone, long-term care insurance policy and an accelerated benefit rider on a life insurance policy. The best option for you will depend on your current situation and long-term financial goals.

Long-Term Care Insurance

Long-term care insurance policies reimburse expenses for services typically not covered by health insurance, Medicare or Medicaid. Common services include home care, assisted living and long-term care facilities. These policies accumulate no cash value, so you must use it or lose it. Premium payments are required for life and will likely increase over time as you age because premiums are not guaranteed. Inflation protection is available at a rate of 3% to 5% per year from the purchase date.

This means your benefits increase each year you own the policy as the cost of care increases. You must be found to be healthy to qualify, so consider purchasing a policy in your mid-50s, prior to any potential major medical issues, to receive the best possible rate.

A stand-alone policy may be an affordable way to cover long-term care expenses because you pay small amounts each year to cover large expenses in the future.

Life Insurance

An accelerated death benefit rider is a rider associated with your life insurance policy but is not offered by all insurance companies. The rider allows you to save on the monthly premiums of a stand-alone, long-term policy because the benefits come out of the life insurance death benefit (2% per month and greater is common).

The policy owner would be eligible to receive these benefits while needing care, with the unused portion of the death benefits paid to the beneficiaries at death.

Inflation protection is an option with some of these plans, similar to the traditional plans. This option has premiums that can be guaranteed not to change and a payment plan customizable for a single payment to a monthly payment for life. Qualification for this option can be more flexible with a greater underwriting emphasis on mortality.

If cost recovery of premiums paid is a priority for you, this option might be considered because the benefits will be paid; the question is when, not if.

Given the 70% chance you could need long-term care, it’s important to factor funding those costs into your planning.

Access to a Wealth of Knowledge and Solutions

The right support makes all the difference. That’s why our advisors have access to an in-house team of wealth management professionals. They use their knowledge to tap into the right resources and solutions for your complex wealth challenges.

Because when advisors have access to a more collaborative approach, you get access to more sophisticated solutions. Let’s get started.

Sources:

¹“How Much Care Will You Need?”

²“Genworth Cost of Care Survey”

This material is provided for informational and educational purposes only. It does not consider any individual or personal financial, legal, or tax circumstances. As such, the information contained herein is not intended and should not be construed as individualized advice or recommendation of any kind. Where specific advice is necessary or appropriate, individuals should contact their professional tax, legal, and investment advisors or other professionals regarding their circumstances and needs.

Any opinions expressed herein are subject to change without notice. The information is deemed reliable, but we do not guarantee accuracy, timeliness, or completeness. It is provided “as is” without any express or implied warranties.

All guarantees and benefits of an insurance policy are subject to the claims-paying ability of the issuing insurance company.

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