RETIREMENT CONCERNS

How to plan for the cost of long-term care in retirement

At least 70% of people over age 65 will eventually need some form of long-term care.* Because Medicaid and most health insurers don’t cover this kind of care, these costs can significantly impact your savings in just a few years unless you have long-term care or other additional insurance. Think of this as “retirement insurance” that can help you prepare for possible major expenses in the future.

There are several choices for helping to meet long-term health care costs in retirement. You can benefit from long-term care insurance, life insurance with long-term care benefits or term life insurance.

Long-term care insurance

A long-term health care policy provides coverage to elderly or disabled persons who need assisted living services, such as help with bathing or eating. Newer policies often cover dementia care as well.

It’s more affordable to purchase this kind of policy if you’re younger, because the cost depends on your current age and health. It may cost more to increase the amount of daily or lifetime benefits, to cover a longer time period for care or to add optional benefits like inflation protection.

As with any policy, ask for information about the insurer’s premium rate history, because this is subject to change.

Life insurance or annuities with long-term care benefits

The risk of buying long-term care insurance is that by purchasing insurance at a younger age, you may end up paying for something you don’t use. An alternative to long-term care insurance is a life insurance policy or an annuity that offers long-term care benefits.

These types of policies pay for long-term care that may not be covered by regular health insurance. These benefits will be used no matter what, whether they are used to cover long-term care or as a death benefit to your beneficiaries. But because this type of coverage is relatively new, there is little claims payment history available.

Term life insurance

Term life insurance covers an individual for a designated amount of time (the term). You choose the time frame and the coverage amount for the policy. Terms can range from 10 years to 30 years. Over this time frame, you typically pay a fixed rate of payments (called the premium). Once the policy is up, you receive a payout (called the death benefit) which could help cover a major expense such as long-term care. In case of death, this payout is given to your beneficiaries. Term life insurance is often popular with younger individuals, as it’s cheaper than other types of life insurance.