If you’re in good health and enjoying life, it’s hard to fathom the possibility of spending a good portion of your nest egg on long-term care. But the truth is the vast majority of Americans will need this expensive service at some point.
A person turning age 65 today has almost a 70% chance of needing some type of long-term care services, according to LongTermCare.gov. The average annual cost of an assisted living facility is about $43,200, and the average length of stay is 3.7 years for women and 2.2 years or men.
It’s important to note that Medicare does not pay the largest part of long-term care services or personal care—such as help with bathing, or for supervision often called custodial care. Medicare will help pay for a short stay in a skilled nursing facility, for hospice care, or for home health care if you meet certain conditions.
So what’s the solution? Unless you want to chance spending more than $100,000 of your retirement savings on long-term care expenses, it’s wise to invest in long term care insurance. While there are many different options to consider, unfortunately the one thing they all have in common is their expensive price tags. With that in mind, consider the following tips to help you save money on this significant, but necessary investment.
1. Take out a joint policy with your spouse
With this strategy, you and your spouse are both investing in long-term care, but you are saving significant money by combining your policy. If you each buy a five-year policy, then that’s 10 years combined. This is beneficial not only from a cost standpoint but also because of the fact one spouse will likely need more long-term care than the other. With a joint policy, there’s more of a cushion of time for both spouses to benefit from long-term care services.
2. Invest in a policy that’s tailored to your financial needs
If money is tight, but you want to invest in at least some insurance, you can decrease your daily maximum benefit, which will in turn lower your premiums, and then you’ll pay the difference out of pocket. Another strategy to decrease premiums is to increase the period of time before your policy starts paying benefits. This will work if you can afford a few months of long-term care up front.
3. Invest sooner, rather than later
It doesn’t pay to wait with long-term care insurance. If your goal is to get the most benefits for the least expensive price, consider applying for an insurance plan when you’re in your mid-50s to 60 years old. In this age range, people are usually still healthy enough to get a relatively good rate. The cost of long-term care insurance for a 65-year old could be more than twice as much as the cost of insurance for a 55-year-old, according to the American Association for Long-Term Care Insurance. So don’t delay!
4. Take advantage of your state’s long term care partnership programs
Purchasing a Partnership-qualified (PQ) long term care insurance policy provides the benefit of “dollar-for-dollar” asset disregard or “spend down” protection. Individuals who purchase a PQ policy ‘earn' one dollar of Medicaid asset disregard for every dollar of insurance coverage paid on their behalf.
So, for example, if you buy a PQ policy that pays out $150,000 of long term care insurance claim benefits, you’ll earn a Medicaid asset disregard that allows you to keep an additional $150,000 over the asset level you would have otherwise had to meet in order to be eligible for Medicaid. That means you don’t have to worry about exhausting your insurance coverage and only need to purchase enough insurance to cover your assets. An added bonus: the Partnership Program also protects those assets after death from Medicaid estate recovery.
5. Check into your employer’s long-term care options
This is a good thing to put on your checklist if your state doesn’t offer a partnership program. If the company you work for offers group long-term care insurance, chances are it will be much less expensive than purchasing it as an individual—especially if you have poor health. A couple of added bonuses: you may be able to take your plan with you when you retire, as well as extend it to your spouse or another family member.
6. Move to a more handicap accessible home, or make improvements to your own living space as you age
This is one of the key ways to delay the need for long-term care. If you are unable to perform two out of the six basic daily living activities (eating, bathing, dressing, accessing the bathroom, walking, and controlling bodily functions), then there’s a good chance you’ll need long-term care. But if you make changes such as moving to a single-story home, or remodeling your current space to make it more wheelchair friendly, for example, then you may be able to extend your independence. Consider contacting a Certified Aging-In-Place Specialist (CAPS) for further assistance in this process.
Long term care insurance is a significant investment, but with a few proactive moves, you could end up with more money back in your pocket to fully enjoy your golden years.