We don’t want to think about getting old. But every morning that you wake up with a new pain in your joints, you’re reminded of that eventuality.
The great news is that these golden years can actually be some of the most beautiful and cherished of your life. The key is to create a solid long-term plan. You don’t want to be reliant on family or government programs for your long-term healthcare. True long-term planning is designed to keep you comfortable while giving you peace for the future.
It’s unfortunate that many adults haven’t thought ahead to develop a plan for those later years in life. The last thing you want, after working so hard, is to end up in a less-than-ideal situation. That is where long-term care services come into play. Recent research shows that 70% of people will need these types of services at some point in their lives. The need for these services can be sudden, and the associated costs can be high. But there’s no need to let these circumstances sidetrack your dreams; we firmly believe that planning for long-term care expenses is a key part of your retirement plan.
Let’s discuss what exactly qualifies as long-term care, mistakes we often see people make, and some considerations to implement coverage should you need assistance later in life.
What Is Long-Term Care?
Long-term care refers to helping people perform activities of daily living (ADLs). There are six ADLs, and to qualify for long-term care, you need to be unable to complete at least two of them without assistance.
These activities include bathing, eating, dressing, using the bathroom, transferring from one place to another (like a couch to a bed), and continence. If you aren’t able to do these on your own, you’ll need assistance. The question then becomes: How do I plan for this type of scenario? Do I pay for it out of pocket, purchase an insurance policy, or find some other alternative?
Before we get there, let’s discuss what not to do.
3 Long-Term Care Mistakes
The biggest mistake you can make is not being prepared, especially as it relates to how much long-term care could cost. Since the types of ailments any of us may have in the future vary greatly, the cost associated with that care will also vary. For example, if you are able to live in your home but still need assistance with some ADLs, you could hire a home health aide to come assist you. In Michigan, the median hourly cost for this service is around $30.77.
However, if the type of care you need is more extensive and you need a private room in a nursing home facility, it would cost $10,455 per month. If you were to spend a year in the nursing home, it would cost a whopping $125,462—and some people spend multiple years in these types of facilities.
While we don’t have a crystal ball and cannot predict your future health, we do know that people who are aware of these potential future costs are better able to plan for these expenses, which helps them meet their retirement goals regardless of whether they need this care or not.
Another mistake we see far too often is incorrectly planning for LTC. While it might be a nice idea to assume that your spouse or children will take care of you, it often doesn’t play out that way in reality. Your spouse will likely not be able to handle the physical demands of this care, and your kids will have their own lives and responsibilities to manage. Even if they want to, they may not be able to give you the time and attention you will need at this stage of life.
Lastly, even if you do purchase a long-term care policy, you need to understand what your policy would cover and what it wouldn’t. You cannot simply assume that insurance will cover everything, because that may not be the case. While these policies can usually cover 100% of home healthcare expenses (as they are the most affordable), they may not be able to cover all expenses associated with assisted living and skilled nursing.
How to Cover Your Long-Term Care Needs
If you want to properly plan for your long-term care needs, I highly recommend you work with an independent financial advisor who can help you tailor a solution to your specific needs. There are a variety of options in the marketplace, and this isn’t a purchase that you should make without proper due diligence.
There are a few options we like to consider when evaluating policies. First, we think that a shared care rider on a traditional long-term care policy could be a great option. A shared care rider is for couples who own a policy together and allows them to share their maximum benefit amount. For instance, if a policy only allowed each spouse $250,000 of lifetime care, if one spouse hit that limit, then they would be left paying for everything above that amount out of pocket. With a shared care rider, once that spouse exceeded $250,000, they could then tap into their spouse’s lifetime benefit, allowing the couple to continue to benefit from their insurance policy. To lower your risk in the event of significant long-term care costs, consider this route.
Another option is a hybrid long-term care policy. Instead of owning a traditional long-term care policy (which only provides you a benefit if you need long-term care assistance), a hybrid policy can offer more flexibility. These types of policies combine long-term care benefits with life insurance benefits. If you end up needing long-term care help, these policies can be used for those purposes; but if you don’t need the help, they will provide a death benefit to your beneficiaries at your passing. For people who aren’t sure they’ll need to use their policy and are worried about not getting a benefit from it, this might be the solution.
Let’s Put Your Plan in Place
Why wait until later in life to start planning for long-term healthcare? Take some time to start today and give yourself the comfort and confidence you deserve. At Center for Wealth Management, our goal is to help make your future dreams a reality. We understand everyone’s story is different, and we are ready to work with you to help you live the life you want. And as fiduciaries, you can trust that we’re putting your best interests first, always. Let us help you pursue your ideal future today. Schedule a free introductory meeting online, call (248) 220-4321, or email me at firstname.lastname@example.org.
Justin Williamson is a senior partner and co-owner of Center for Wealth Management, an independent, fee-based wealth management company in Troy, Michigan. Justin has been serving clients in the financial services industry since 2001. He spends his days helping his clients achieve their financial goals and make the best decisions for their families so they can spend time on what they love and experience financial peace of mind. Justin is known for his dedication, integrity, personal touch, and ability to simplify complex issues. Justin specializes in serving engineers and other professionals who are close to retirement or recently retired and helping them maximize their benefits and create a retirement plan they can rely on. He is a seasoned public speaker and presents at numerous corporate events each year on retirement planning, Medicare, Social Security, and other financial topics. Justin has a bachelor’s degree in Business Administration majoring in Personal Financial Planning from Central Michigan University and is a CERTIFIED FINANCIAL PLANNER™ practitioner.
Outside of work, Justin enjoys spending time with his family. He and his wife, Corinne, have five children between them ranging in age from sixteen to twenty years of age. Justin lost his first wife, Heather, to brain cancer in 2020, and thus has experienced firsthand the emotional, mental, and financial challenges spouses and children go through when dealing with such a tragic situation. Outside of work, Justin enjoys coaching or attending baseball, softball, powerlifting, and basketball events, traveling to new locations, and spending time at the family cabin at Higgins Lake. Learn more about Justin by connecting with him on LinkedIn.