People are living longer and will likely need long-term care (LTC) at some point in their lives. The unknowns in most financial plans are how many years you will need LTC and what it will cost. Periods of high inflation significantly increase the cost of health care and LTC, even when prices return to normal. According to a study by Healthview Services, retirees will have to pay for healthcare in retirement, with inflation currently at a 40-year high. Other study findings include:
With the cost of LTC increasing year over year, Americans must consider how to pay for long-term care during high inflation. Not planning for LTC can be devastating to retirement portfolios later. While high-net-worth individuals can self-fund their LTC and low-income individuals that receive Medicaid have LTC covered, middle-income people have to worry about how LTC will affect them.
During financial planning, it is essential to see the impact of self-funding on the cost of LTC at 100% versus the LTC insurance premium outlays. Having LTC costs calculated into a financial plan is essential to help you determine if you will need to purchase LTC insurance to help ensure your retirement assets last if you need care later.
that helps cover the costs of that care when you have a chronic medical condition, a disability, or a disorder. Most LTC policies reimburse you for care in:
that covers more than just nursing home care. LTC hybrid insurance combines LTC and life insurance into one policy. Here’s additional information about hybrid-LTC policies:
Long-term care insurance can have some tax advantages if you itemize deductions. Federal and some state tax codes allow you to deduct part or all of LTC insurance premiums as medical expenses if they meet a certain threshold. Your tax professional can help you determine if LTC premiums are deductible for your situation and a viable way to help pay for Long Term Care During High Inflation
but once your retirement savings deplete, other assets such as your home and personal belongings will need to liquidate to pay for care. Family members may be required to pay a portion of your care, depending on the laws in your state, if you have no assets to do so.
is designed to help low-income families with both acute and long-term care. An individual 65 years or older must have an income of less than $2,523 / month. Only the person’s income needing care is considered, not their spouse. This income threshold applies to nursing home Medicaid and assisted living services and in-home care in states that provide it through HCBS Waivers.
enable people with high-deductible insurance plans to save pre-tax dollars for future medical expenses, which can include LTC if a licensed doctor certifies that:
If an individual meets these criteria, they can use their HSA to pay for nursing services. In addition, personal care in their home or a nursing care facility. There are other ways to pay for LTC through other benefits, such as VA benefits for veterans. However planning for the increasing costs of LTC is essential, regardless of your age. Your financial professional can help you weigh your options and determine an appropriate strategy to help you pay for your LTC.
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Northland Financial LLC assists families and individuals with retirement income planning. As well as Medicare, Social Security, life insurance, IRAs, college planning, and asset management. Contact us today to schedule an appointment.