Financial planning for long-term care is an important topic that many people overlook until it is too late. Long-term care refers to the services and support that help people with their personal care needs such as bathing, dressing, eating, and managing medications. Long-term care can be provided at home, in an assisted living facility, or in a nursing home.
There are several ways to pay for long-term care, depending on your financial situation and the kind of services you need. Some of the options are:
- Personal funds: You can use your own savings, income, or assets to pay for long-term care out of pocket. This may be feasible for some people who have enough resources or who only need a short-term or low-level of care. However, this option can quickly deplete your savings and affect your quality of life.
- Government programs: Some federal and state programs can help you with some of the costs of long-term care, but they have eligibility requirements and limitations. For example, Medicare only covers short-term skilled nursing or home health care after a hospital stay, not long-term custodial care. Medicaid covers long-term nursing home care and some home and community-based services, but only for people with low income and assets. You can also check if you qualify for other benefits, such as Veterans benefits or programs offered by your state or local government.
- Private financing options: There are several private products that can help you pay for long-term care, such as long-term care insurance, reverse mortgages, life insurance policies with long-term care riders, annuities, and trusts. These options have different costs, benefits, risks, and tax implications. You should consult a financial planner or an elder law attorney before choosing any of these options.
To begin financial planning for long-term care, you should start with these steps1:
- Use a worksheet to organize your financial and legal documents, such as bank statements, insurance policies, wills, and power of attorney.
- Identify family members that should be included in your financial plans and discuss your preferences and expectations with them.
- Identify the costs of care in your area and estimate how much you may need in the future based on your health status and personal needs.
- Review your current income and assets and see how much you can afford to pay for long-term care out of pocket.
- Review your existing insurance coverage and see if it covers any long-term care services or if you can supplement it with other options.
- Decide who can help you complete routine financial responsibilities and manage your affairs if you become incapacitated.
Financial planning for long-term care can help you protect your savings, reduce your stress, and improve your quality of life. It can also help you avoid financial ruin and ensure that you get the care you need when you need it.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.