Life expectancy for America’s retirees is on the rise. Baby boomers entering retirement today may live another 20 to 30 years.
An increased life expectancy is not without complications, though. To fund 30 years of retirement, adults must plan their finances around long-term care. Failing to do so could cost someone their hard-earned pension and much of their estate.
Securing finances for end-of-life expenses
Aging often presents uncomfortable realities for many families. The truth is that 70% of Americans will require long-term care at some point, likely during their declining years. This kind of care is not cheap, either. In 2016, the cost of a private room at a nursing home was nearly $8,000 every month. In-home care is cheaper, but still pricey — just short of $4,000 every month in 2016. The costs of these services have only risen over the past four years.
Many seniors turn to Medicare to cover these costs, but the program will only cover a short stay in a hospital or other assisted living facility. To qualify for Medicaid, retirees must reduce the value of their estates significantly. Spending down assets will qualify one for Medicaid but leave any surviving spouses or heirs with vastly depleted resources. Thankfully, options are available.
Long-term care insurance options
Among the simpler ways to plan for end-of-life medical costs is with long-term care insurance. These plans work similarly to life insurance plans with set premiums that increase as one ages. Additionally, recipients must demonstrate that they need assistance with two of six “activities of daily living.” Unfortunately, many states no longer offer these plans. Of those that do, premiums have increased significantly.
Some insurance providers offer a new type of policy that combines long-term care and life insurance. These “living benefits” products allow policyholders to access their money early if they require long-term care. If an individual does not need the coverage before they pass, heirs receive the unused funds in a life insurance payout.
Try estate planning with an attorney
Retirees with questions about other options like asset-based insurance or annuity options can reach out to a local attorney familiar with elder care law. They can field any questions concerned families may have and help explore options for preserving one’s estate.