Doubts loom for elderly people who lack insurance

By 2033, more than 11 million middle-income seniors aged 75 or older may not be able to afford to live or qualify for Medicaid to pay for their long-term care.

These findings, published by NORC researchers at the University of Chicago in August, reinforce the need for Americans planning their future to consider options for maintaining a comfortable lifestyle in retirement.

While many older adults turn to their adult children for housing and care, financial advisors who specialize in retirement planning suggest that long-term care insurance can help reduce or eliminate underfunding for retirees to retain their independence.

First, let’s find out what long-term care insurance is, who needs it, and when you should buy it early.

Bradley Hilton says, “Being exposed to unexpected and exorbitant bills for a nursing home stay or home care can ruin a great retirement plan if it’s not budgeted or prepared. Most people will need long-term care (long-term care) at some point. .”

Michael R. Acosta, financial planner at Consolidated Planning, adds: “Long-term care insurance provides home care, home health care, and personal or adult day care to individuals 65 years of age or older or who have a chronic disability condition that needs continuing. Oversight. Middle-class people or those with a family history of medical concerns should plan to need long-term care insurance.”

“If you ever need foster care or long-term care, the insurance company will usually reimburse you for related expenses, up to a daily or monthly amount,” explains Kevin Lau, founder and chief financial strategy officer at Imagine Financial Security.

Long-term care insurance has many criteria that determine your benefits, and therefore your premiums.

These include the amount of benefit and the term of coverage.

Hilton reports that the average length of long-term care needs for men and women is 2.2 and 3.7 years, respectively. You can reduce your premiums by only paying three or four years of coverage. If you are concerned that your case may be longer than average, you can try to save elsewhere.

Kevin Lao says, “The average nursing home costs north of $100,000 a year, or just over $8,000 a month. A policy that pays you that amount in full will cost you a cent. However, if you can afford it and risk causing You lose sleep, do it.”

Next is the initial exclusion period, or how long you cover long-term care costs before your benefits start. The longer the exclusion period, the lower the insurance company’s risk, and thus the lower your premiums.

“My experience has been that a good way to save money on long-term care insurance is to have a waiting period of six months to a year,” says Timothy Book, Summit’s Head of Portfolio Management. “For many people,[live]out of pocket for a manageable year.” Extremely “.

Another important factor is coverage exclusions, or situations that leave the insurance company in trouble. For example, Hilton says, “Policies may limit the terms they cover. For example, it is not uncommon to refuse care for alcoholism, drug addiction, or war injuries.”

On the flip side, Hilton says most policies waive your premiums when you receive benefits.

Lau says, “If you want flexibility in home care and any professional facilities, make sure your policy covers 100% of home care. I’ve seen coverage in nursing homes or adult daycares at 100%, with care at home at 50%, and he doesn’t remember The customer’s reason to buy a policy like this.”

Acosta and Lau suggested considering another attractive option.

Acosta says, “Nowadays, carriers offer both traditional long-term care insurance and hybrid options. Hybrid options offer more flexibility, more down payment for your money, and often premiums are guaranteed flatly compared to traditional long-term care insurance, which is not guaranteed. And it fluctuates over time. With blended coverage, the carrier often offers some form of death benefit (possibly guaranteed), access to investment strategies within sub-accounts, and a range of long-term care coverage.”

Lau adds, “Some policies now have a hybrid component of life insurance, where they pay death benefit if the policy is not used or only uses a portion of the long-term care benefits.”

The problem here is that long-term care insurance policies have become more expensive over time.

Hilton explains why: “Long-term care insurance premiums can increase over time. The insurance company must get state regulators’ approval to raise premiums, which they do from time to time.”

Lau offers five tax-effective ways to cover long-term care.

  • Use the tax-free money from your health savings account to cover your long-term care insurance premiums.
  • Do what’s called a ‘1035 exchange’ for a life cash value or an annuity. If you’ve accumulated cash in a permanent (not term) life insurance policy and no longer need the coverage in retirement, you can charge a tax-free cash value exchange in a care insurance policy long term.
  • “The above hybrid options can protect your investment assets if you need long-term care. If you do not need long-term care or do not use your entire benefit pool, the death benefit will pass to your beneficiaries.
  • “If you don’t have heirs or they don’t need your inheritance, you can self-insure using tax-deductible withdrawals from your health savings account assets. You can use required minimum distributions from 401(k) or IRAs (that is, you’d pay tax anyway) or even a reverse mortgage.
  • “If you can afford to self-insure but want to leave a financial legacy, you can buy a permanent life insurance policy to renew your assets upon your death, even if you have to pay for long-term care towards the end of your life.

Most people would benefit from at least considering long-term care insurance, especially starting in their late forties or early fifties. However, after more than a decade of premium increases and interest drops, buying great coverage isn’t as soon as possible or as affordable as it once was.

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