Planning for Long-Term Care
August 05, 2020
By Heidi Huiskamp, Founder and CEO of Huiskamp Collins Investments, LLC
Long-term care. It’s a tough subject and the conversation on which everyone in the family shies away from. It’s scary and uncomfortable and, too often, the default decision on long-term care is to just pretend that it won’t happen and hope for the best. Here’s the sobering truth, though: according to the U.S. Department of Health and Human Services, approximately 70 percent of women and men over 65 years of age will need some degree of long-term care services during their lifetimes. Whether that means home healthcare, assisted living, or a nursing home, the best policy is to address the subject with a cool head and make preparations well in advance of need so that your wishes, those of your family, and how those will be funded are ensured.
According to the most recent 2020 numbers from Genworth, one of the largest issuers for long-term care insurance, the average cost of a private room in a nursing home is $100,400 per year and $89,300 for a semi-private room. LongTermCare.gov, a federal resource, estimates that the average stay in a nursing home in 2019 was 835 days and about 20 percent of patients admitted would have stays in excess of 5 years. It doesn’t take a high level of math to see that those costs for even one member of a married couple could easily derail a comfortable retirement nest egg.
I get calls at least monthly from frightened savers who ask me to help them “hide money” so that they can get Medicaid to potentially pay for nursing home costs for themselves or a loved one. Please know that I will not participate in efforts to illegally shelter money. I need to take a moment to talk to you about Medicaid, though. Medicaid is currently the number one way to fund nursing home costs in this country. It comes at a cost, though. Depending on your state of residence, you will need to spend down your assets to qualify for Medicaid benefits, meaning that the bulk of your savings, investment accounts, and retirement accounts will need to be nearly exhausted. If you are married, your spouse can generally retain the family home, a single vehicle, her or his personal effects, and a relatively small amount of liquid assets. There’s also another uncomfortable truth about which not many people talk. There are 10,000 baby boomers retiring every day and those boomers are going to need long-term care in droves. We currently don’t have enough Medicaid beds in this country to accommodate all that will need them. What does that mean? It means that your loved one might be shipped to a Medicaid facility other than one you might choose or even to a different part of the state away from family and friends. In order not to fall prey to a situation like that, it’s important that you and your family have a plan.
A plan can vary from family to family. Maybe you have a child or other family member who would be willing to take you into their home and care for you. Or maybe siblings can take turns in providing care in the parents’ home on alternate days of the week. The time to have those discussions is when everyone is healthy and well rather than in the middle of a crisis when emotions are running high. Consult all stakeholders in the family. If you are going to contribute your retirement income to the caregiver’s household budget, make sure everyone is on the same page. If you are thinking about altering your estate planning documents, discuss the changes with all of your heirs rather than setting them up for a big blow-out after your death. You don’t want to do that to your kids.
Long-term care insurance is a great option, but there are some downsides. First off, it’s very expensive. If you need it, it’s a lifesaver. If you’re part of the 30 percent who may never use it, though, it’s a huge expense. There are some insurance company products that are life insurance / long-term care hybrids. If you need care, you can use the policy to pay the facility or caregiver for those benefits. If benefits are never needed, though, your heirs will receive a lump sum just like a regular life insurance settlement. Many companies that used to sell long-term care insurance have gotten out of the business as insureds are living longer, the price of care keeps escalating at a pace higher than inflation, and they could not make money on the policies. Even if you are willing to pay for long-term care insurance, you might not be able to get it. You will need to undergo a medical exam, a cognitive exam, and a thorough review of your medical history. I’ve had clients denied because of their weight or for a small blip in their medical records. The time to apply for a policy is when you’re still relatively young and healthy.
These are tough decisions, but I’d love to help. Please contact me at 563-949-4705 or email@example.com to get the most up-to-date information and help in sorting through your options.
Securities offered through J. W. Cole Financial, Inc. (JWC) Member FINRA/SIPC. Advisory services offered through J. W. Cole Advisors, Inc. (JWCA). Huiskamp Collins Investments, LLC and JWC/JWCA are unaffiliated entities.
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