Retirement health care costs

At least 70% of people over age 65 will need some form of long-term care.* Unfortunately, if you are not prepared, the costs can potentially wipe out your family’s savings in just a few years. Although the cost of care actually varies widely depending on where you live, there are things you can do now to plan ahead.

 


3 insurance options

1. Long-term care insurance

This kind of policy is designed to provide care to elderly or disabled persons who need assisted living services, like help with bathing or eating. Newer policies often cover dementia care as well.

Such a policy is often more affordable if you purchase it when you’re younger, since cost depends on your current age and health. Other factors, like the maximum amount the policy would pay each day, the time period covered and optional benefits, like inflation protection, may come at additional costs.

As with any policy, it’s a good idea to ask for information about the insurer’s premium rate history, since those are subject to change.

 


2. Life insurance, or annuities, with long-term care benefits

You might be reluctant to buy long-term care insurance. What if you wind up paying a lot of money into something that you never use? Instead, you might consider a life insurance policy or an annuity that offers long-term care benefits.

The idea is that, whether the benefits are paid to cover long-term care or as a death benefit, they will get used. Keep in mind, however, that this type of coverage is relatively new, so there is little claims-payment history available.

 


3. Term life insurance

You may have heard that if you have term life insurance, you can use so-called life settlements to pay for long-term care.

Here’s how it works: Policyholders sell their coverage at a discount in the secondary market, giving them cash to spend for whatever care they choose. The drawback is that the company buying the policy generally keeps a sizeable chunk of the value.