Should I Get Long Term Care Insurance? [Video]

Long term care usually becomes one of your largest expenses in retirement. Should you get long term care insurance? In this video we walk you through the types of care available, general costs, and the different ways you can pay for them. Read the transcript below.

Video Transcript

70% of adults age 65 or over will need some form of long-term care as part of their retirement plan.

Hi, my name is Michelle and I’m a financial advisor here at Financial Design Studio. We help business leaders retire in a tax-efficient way. And a huge piece of retirement planning is long-term care, which as you get older, you start to need different forms of care.

Now maybe you’re watching this video because you’re looking toward your future in retirement, or maybe you’re presently trying to create a plan for your aging parents or loved ones. This video is a guide for you. We’ll walk through the different options you have, some of their costs, and the ways you can fund them. So let’s dive in!

What Are Your Long Term Care Options?

So we get the question a lot, do I need long-term care insurance? And what I want to start to talk through first are the options that you have for long-term care and what they cost. If we talk about long-term care, let’s talk through the first few options that people typically have when they think about what’s the care that I want as I age.

A natural one could just be in-home care. So maybe you just want to stay in your home where you live already and you just want someone to come in and care for you.

Then another step up in your care is assisted living. This is where you could go somewhere to a facility, or maybe to a home like a townhome or a single-family home on the campus of that medical facility.

And then finally is more of like a nursing home or continuing care where you have care around the clock. You know that as you age, you’re gonna stay there, you’re not gonna be moving again, and you’re gonna get the additional care that you need as you do need it.

What’s interesting about these three levels of care is that as you hear them, you might have a strong preference for or against some of these options. What’s really important as you start planning for retirement is that you start to say, here’s what I would really like to happen if it was ideal and if I had a choice.

What Will It Cost?

Now, when we start thinking about just long-term care coverage, generally what we see it could be anywhere from $5,000 a month, maybe all the way up to even $15,000 per month. These are monthly costs and you can see that these could easily get up to $180,000 per year for one person for the care that you need. You can see why someone might consider getting long term care insurance to cover this.

But, $5,000 a month could actually be high if you’re someone who says, want to live in home. So again, this is just a range to give you kind of an idea or something to help you plan in your retirement plan. So that’s kind of that average cost that we see.

There are different ways to pay for this. In these different communities, you just might have a one-time cost where you’re just going to purchase the unit. There’s kind of this one-time cost, much like you’re buying a house, like you’re buying your home that you’re going to live in.

Or you might see a combination of that one time cost, plus a monthly fee to cover that those health care needs that you have or the care that’s really beyond just living there. These are really important questions in your plan to be asking. Now when we’re building a retirement plan, we can build in costs. This is when we start to kind of look through our options to see what works for your plan. It’s not just a one-time plan, it’s something we’re always working on as you start to change your needs.

What Does Health Insurance Cover?

Now as we’re talking as we are talking, things can get a little fuzzy between long-term care insurance and regular Medicare or health insurance. So I do just wanna spend a minute here where I’m going to explain the difference and to help you understand maybe what type of coverage would cover what expense. These can sometimes overlap which makes it tricky.

If you’re purchasing a unit where you’re going to live in a community, that’s great but only half the puzzle. Because health insurance, just like today, when you need to go to the doctor, you need to pay for that doctor’s care or that prescription coverage.

So health insurance really covers those doctor visits, things like prescriptions. That’s what’s being covered by that specifically. As you’re working today, your employer’s covering your health insurance.

When you retire, the different portions of Medicare step in to cover that. So that’s covering once you’re 65, Medicare is covering as your primary health insurance. And then you might get a secondary. So this could be another policy, Blue Cross Blue Shield, any company that’s basically going to cover most of what Medicare does not.

The other way you might cover these extra expenses is a Health Savings Account (HSA). This is a great tool to save for expenses in retirement and receive a tax benefit. So this is where you can start to see kind of different pieces are covering different things as you think about your retirement plan and this health insurance, health costs that you’re going to have, which can include your housing or kind of the long-term care coverage as well.

What About Tax Deductions?

For those who realize they really can’t live at home anymore, you have to spend a lot of money to move into a community where this healthcare is covered. But you’re actually able to deduct a good portion of, these medical costs.

On your tax return, you have to have higher than 7% to 10% of your income towards medical expenses before you can even deduct any health insurance costs.

Well, because so much of your costs, so for these in-home care or the assisted living medical facility that you’re going to live at, that care that you’re paying for is considered medical, a large amount of that is able to be deducted. So while it can seem expensive and it is expensive, it’s a lot of money to get this level of care, you can also typically deduct a portion of that.

What Are Your Next Steps?

Okay, so now that I’ve explained these differences between long-term care and medical costs, now that I’ve explained these differences between long-term care and health insurance, I want to help you understand what you can do now.

First, that is what you’re doing. You need a retirement plan that is being implemented and monitored regularly. And your long term care needs to be included!

Secondly, you need to make sure that your estate planning documents are in order. That includes things like a will, a trust, powers of attorney for healthcare, powers of attorney for property. At a minimum, you need to have those documents in order. Depending on your situation and your level of assets, you might need more documents, different types of trust, different amounts of trust, things like that.

Finally, you need to be saving for these expenses. So remember when I said a lot of people will ask us, Should I have a long-term care policy? Really the answer to this question lies in your retirement plan. How much are you saving? What are you expecting these expenses to be? What level of care do you want?

Those are the pieces now in this retirement plan as we start talking about what you want it to look like that we see.

Conclusion

So long-term care usually ends up being one of the largest expenses in retirement, which is why planning ahead is really important. If you’re someone who’s starting to think about retirement and you want to retire in a tax efficient way, we’d love to help you.

Click “Get Started” to answer a few questions about you. Then, we will schedule your free consultation with our team to discuss your retirement needs. Thanks for watching!

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