LONG-TERM CARE & DEMENTIA CARE

PAYMENT OPTIONS

LTC INSURANCE

BACKGROUND

According to research conducted by the Urban Institute in 2014, less than 11% of people over 65 had long-term care insurance. This is in spite of research that shows that approximately 70% of individuals will need some form of coverage during their lifetime. Those who have assets that they want to pass on to others should consider ways to pay for long-term & dementia care that will preserve their assets.

For couples the need is even more important to plan for. It is common that when one spouse, or partner, becomes ill that the only concern is how to take care of them. Unfortunately, what often happens is that the estate of the couple is drained of resources in order to provide care. This can leave the surviving spouse/partner with limited to no resources to provide for their own care, and can also reduce their quality of life if the money used to provide care was also needed to produce income.

In addition, the cost of dementia care can be substantially greater than other long-term needs due to the length of time dementia care can last. By 2025, the number of seniors with Alzheimer's could reach 7.1 million, up nearly 29 percent from current levels.

Our goal is to provide our clients with a plan that will produce the income they need in retirement, as well as provide for long-term & dementia care, but do in a way that you don't lose the money if you never need it.

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Long-Term Care Insurance

Long-Term Care Insurance "LTCI"

When talking about LTC and Dementia Care, LTCI is the first type of coverage most people think about. Let's talk about the Pros and Cons.*

PROS:

  • As Mark Meiners, a professor of health administration and policy at George Mason University, pointed out:

" 70% of those who reach 65 will need long-term care. With long-term care costing as much as $250 a day, it doesn’t take long to completely deplete a lifetime of savings — even if you’re ‘lucky’ enough to only need it for a relatively short period of time.”

LTCI thus provides the peace of mind of knowing that a portion of your future needs will be met.

  • Once a client qualifies, most LTCI policies are "guaranteed renewable.” This means they cannot be canceled because of the policy holder’s age, physical condition, or mental health. In effect, the policy won’t expire unless your client uses up the benefits or stops making premium payments.
  • The benefits paid through a LTCI policy are generally not taxed as income. If federal standards deem a client’s LTCI policy “tax-qualified” and their itemized medical costs are in excess of 7.5% of adjusted gross income, they can deduct the value of the premiums from their federal income taxes. The amount of the deduction depends on their age.
  • No one wants to be a burden to their family. Unanticipated long-term care expenses can wipe out a client’s savings. LTCI can help prevent that, reducing any financial burdens on clients or any of their family members who step in to help.

CONS:

  • You must qualify for coverage. Ideally, policies should be purchased when clients are young and healthy, but this is often not the case.
  • 15% - 20% of LTCI applicants fail the underwriting process and are considered too big a risk by the time they decide to get coverage.
  • Depending on the carrier and your insurance contract, benefits are not paid out until you are unable to perform two or three Activities of Daily Living.
  • There is an elimination or waiting period before benefits are paid. Depending on the policy design, witing periods can range from 0 days to 365 days. The shorter the waiting period the more expensive the coverage.
  • Unless there is a return of premium option, your estate will lose the money spent on care if you never use it.
  • Finally, most LTCI premiums can increase: A company cannot single a client out for a rate hike, but it can raise premiums on a class of similar policies in their state, and most premiums do end up increasing during the length of the policy

* https://blogs.cfainstitute.org/investor/2016/09/19/the-pros-and-cons-of-long-term-care-insurance/

There are strategies that provide for an unlimited pool of coverage for an individual, or couple, without the risk of increasing premiums. Get A Quote

This means you can effectively put a moat around your assets and not worry about paying for Long-Term Care or Dementia Care. You can then enjoy your retirement knowing that your care needs are covered and if you never use them, then your heirs will benefit. This is not "Use It or Lose It" coverage.

To get information on what to consider for Long-Term & Dementia Care, download the Free infographic by clicking the button.


Private Pay

Since most people don't have LTCI in place to cover the expense of long-term care & dementia care, they are left with several options: private pay, government programs, and tax-free options. In this section, we will discuss private pay. Private pay includes using your savings, 401k, 403b, IRA, investment accounts, and home equity to pay for care.

This means that you will be converting your assets to cash in order to pay for care. If the stock market or housing market is down when you need to generate cash, this will erode your available funds. While LTCI can be expensive, it is usually less expensive than private pay where you are paying pennies on the dollar.

In addition, if you are going to use the same assets that you are using to generate income for retirement, you will be depleting your retirement assets while you are paying for care. This can be devastating to a surviving spouse who may no longer be able to enjoy the lifestyle that was planned on because of the drain of LTC spending.

Private pay can be a very expensive way to pay for long-term care & dementia care because you are assuming all the risk with your assets and investments. You will effectively be spending down your assets until you reach a specified level where you may then qualify for government programs. At this point, your choices for care will be limited.

To get information on what to consider for Long-Term & Dementia Care, download the Free infographic by clicking the button.


GOVERNMENT

Medicare: Is not intended to provide for a long-term care event. Medicare will pay for up to 100 days of care, but the national average is 26 days. The reduction in days is because coverage will stop if a person's improvement or health plateaus. There are also co-pays that could be required as well.

Medicaid: Long-term care is normally provided through nursing homes when Medicaid is being used. Most Medicaid facilities are semi-private rooms and availability can vary depending on different regions. You may not be able to get a Medicaid approved bed in the area you want. Medicaid and what services are covered are based on federal requirements, but states have considerable leeway in how they operate their programs.

Veterans Benefits: Veterans have a special benefit that’s available, it’s called the Aid and Attendance Pension Benefit. If you serve 90 days active duty, and with one of those days was while a war was going on you are likely eligible for a little over $27,000 a year or tax-free money that can pay for homecare, assisted living, and nursing home care. The interesting thing is, if you are a widow of a veteran, you’re also eligible.


TAX-FREE MONEY QUOTE

Many strategies enable you to use tax-free dollars to pay for Long-Term & Dementia Care. All of them include using an insurance company to transfer the risk. The care coverage we offer our clients is different than what you may be familiar with through traditional LTCI. Depending on your health and circumstances, you may receive the following benefits:

  • An unlimited pool of funds for care for an individual or couple.
  • It can be used for at home, assisted living, and nursing home care.
  • Care can be designed to cover both spouses.
  • If you don't use the benefits, your heirs get the money.
  • No additional increases in premiums or decreases in benefit payments.
  • Coverage will be customized to your individual needs and budget.

Everyone's situation is different, and there are many variables to consider. If you would like to get an idea of the amount and type of coverage you may qualify for, click the button below to schedule a quick meeting.


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The Pension Protection Act allows you to use money from your annuity or life insurance to pay for Long-Term Care & Dementia Care tax-free. You can learn much more by attending one of our webinars or getting a Free copy of our book "Tax-Free Dollars for Long-Term Care."