Take Care of Your Future Self by Making a Long-Term Care Plan Today
Sometimes, the unknown can be a bit scary. Previously, I’ve shared several financial tips that will allow you to plan for your financial independence and to own your future. Today, I want to ask you to give me a few somber minutes of your time.
I am asking you to turn off your emotions and turn on your intellect only. This way, you will be protected from your emotions entering in and shutting you off from discussing a tough but important topic: Long-Term Care. Come out from under the blanket for a few moments to learn about this important element of financial planning. Let’s look at what it is, and I promise you, it’s not as scary as you might think.
Long-Term Care as Part of Your Wealth Management Plan
Yes, long-term care is just as important in your wealth management plan as is saving for your children’s education. Maybe I could make it easier for you to consider if I asked you to look at long-term care as a protection for your children/loved ones in lessening their burden when caring for you.
When her fifty-year-old husband suffered a fatal stroke, “Lily” came to me to figure out what financial decisions she needed to make for her and her daughter in case she ever needed long-term care. Neither she nor her husband had a long-term care policy because they assumed they wouldn’t need it until they were in their seventies or eighties. Like most people their age, they thought they had more time to think about it.
Another reason people don’t think about long-term care is the same reason they often don’t want to think about estate planning - they don’t want to dwell on their own disability. No one wants to think about being incapacitated and not being about to perform the six activities of daily living: eating, dressing, bathing, toileting, transferring, and continence.
Unfortunately, the reality is that many of us have to face this situation at some point in our lives. Too many people make the mistake of waiting too long to take out a policy to protect them from this eventuality.
Why Plan Early?
More than a decade ago, Congress passed a law to encourage more people, especially baby boomers, to plan early by buying long-term care insurance. Special tax benefits were offered to motivate people to plan ahead so that they didn’t end up on government assistance, either Medicare or Medicaid.
The government’s attempt to incentivize individuals to plan early was a good idea for a number of reasons:
First, monthly premiums are based on your age when you apply. This makes premiums less expensive when you’re younger.
Second, people often wait until their late fifties or later to buy long-term care insurance without realizing that predicting the withdrawal of the benefits is problematic - we rarely know when we will need long-term care. A stroke or a heart attack can happen to people in their forties or fifties.
Third, coverage is dependent upon your current health status. If you have a sudden heart attack or injury and have an extended hospital stay, the chances of getting a long-term care policy afterward dwindle away to almost nothing because of your preexisting condition.
It’s best to buy your policy when you’re young and healthy because not everyone can qualify if they wait longer. This is particularly true for those with a family history of Alzheimer’s. These individuals are more likely to use long-term care for a longer period of time, which makes it even more important to consider buying long-term-care insurance early before you may show symptoms and buy a longer benefit period than the average of three years.
I bought my policy before I turned forty. No one in my office at the time had heard of someone buying a policy this young. I had a good reason. For years, I had been calling home to my mother in China, and every time we spoke, she told me how difficult it had been for her to visit my uncle, who had Alzheimer’s and no longer recognized her. He was the oldest brother who put her through college after my grandfather died; he was like a father to her.
After nine difficult years with Alzheimer’s, my uncle passed away, and this made me realize how important it is to have long-term-care insurance, not just so that you get adequate care as you decline mentally or physically, but also so that the estate you’ve worked so long to build isn’t used to pay for this care or for modifications to your home if, for example, you can’t climb the stairs.
With the high cost of this care, paying out of pocket could leave your family penniless. The costs of long-term care often exceed what the average person can pay from their income and other assets.
If you think about all the possible health scenarios you could face in your life, it becomes apparent that a financial plan that doesn’t include long-term-care planning is not comprehensive.
Too often, people focus on investment planning or college or retirement planning without considering what would happen to their wealth if they were suddenly faced with the cost of long-term care, which can be upward of $7,000 a month.
If you or your spouse needed two or three years of long-term care, that could significantly derail your retirement plans. It’s important to be smart about your resources now so that you don’t leave yourself open to that amount of risk.
Very often, people do not plan ahead. This is due to a reluctance to think about getting older, developing a disability, becoming less independent, or needing help with personal care. At the same time, they often believe that health insurance, Medicare, and/or disability coverage will cover most long-term-care services should they be needed, so they don’t need to dwell on illness and aging.
Health insurance, Medicare, and/or disability coverage is very limited in its coverage. That means people are often living with a false sense of comfort that their needs, should they have any, will be taken care of long-term.
Thanks for bringing your head out from under the covers to read about long-term care. If you’d like to have a more personal conversation about what options and plans may be best for you, please contact me today.