The Importance of Long Term Care In Retirement Planning

People planning for retirement typically know where they’ll get the money to pay for living expenses and many of the extra things they want to so. But all too often, they fail to plan for long term care expenses. And that can be a costly mistake.

Long term care services are expensive. Based on Mutual of Omaha’s Cost-of-Care Survey, the nationals average cost for one year of nursing home care in a semi-private room is $86,662.00. And that’s just for one person. If both husband and wife need long term care services, a retirement nest egg can be depleted quickly.

So how do people plan to pay for the care they need? Some mistakenly believe their health insurance will cover their long term care expenses. Others plan to let the government take care of them. In reality, health insurance doesn’t cover long term care. And the coverage provided by government programs is limited. For example, Medicare provides some short term coverage simply to help people get back on their feet after an accident or illness. And while Medicaid does pay for long term care services (typically nursing home care), it only pays for people who have no other resources. And for many people, that means spending down assets to qualify.

That leaves two alternatives: Pay for long term care services using retirement assets or protect retirement savings with a long term care insurance policy.

Planning to pay the cost of long term care services out of pocket may seem reasonable. But many people fail to think about the real cost associated with that plan. First, assets may have to be liquidated, which could mean cashing in stocks, selling property or dipping into 401(k) or savings accounts. In addition, liquidating assets may trigger additional costs in the form of capital gains tax, income tax and potential surrender charges. It also has the potential to deplete the inheritance planned for family members.

Purchasing a long term care insurance policy may be the best way to help peole make their retirement assets last as long as possible. For a fraction of the cost they would pay to a nursing home, assisted facility or home health care provider, they can purchase a policy to help pay those bills while protecting a significant portion of their retirement fund.

With all the retirement planning options available, it’s important to remember one thing…people need enough retirement income to cover their expenses. And putting a plan in place to pay for long term care expenses using a long term care insurance policy can be a smart way to make retirement income last longer.

Abe Glickman, LTCA, LTCP
Member: AALTCI, NAHU, NAIFA, SOA
Abe Glickman Insurance Group
Toll-Free Phone: 877-298-5824
Email: AG@AbeGlickman.com

“It is better to create a plan 10 years too soon than one day too late.”

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