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Opinion: How do you think about the risk of high costs for long-term care?

If you don’t properly consider how to plan your potential long-term care costs most effectively, your retirement income plan will not be complete. However, this issue is often overlooked or avoided.

Many do not want to confront the questions and possibilities associated with losing their independence. Psychologically, no one likes to think about the possibility of not being able to effectively handle the basic activities of everyday life. It’s a natural reaction to think that this only happens to others.

Long-term care costs (LTC) represent perhaps the most serious spending shock that can affect retirees. Approximately half of retirees may be able to survive retirement without even facing $ 1 in long-term care. However, in extreme cases, long-term care costs can exceed $ 1 million. The expensive LTC situation spent years in a nursing home can upset an otherwise well-established severance pay system.

Lack of planning can cause long-term care costs to run out of household assets, bankrupt surviving spouses, and burden other families who can make significant sacrifices to provide care. Therefore, it can create tension.

The default long-term care plan is to cover the costs until the assets are exhausted and then move to Medicaid. However, there are other possibilities, including either the traditional Long-term Care Insurance (LTCI) policy, or a hybrid policy that combines long-term care with life insurance or annuities.

To better understand the long-term care planning options, the overall LTC cost can be defined as:

LTC Cost = LTC Cost + LTCI Premium – LTCI Benefits

This equation consists of the overall cost of funding long-term care, which is the actual cost of long-term care plus the premium paid for long-term care insurance minus the insurance benefits received. I emphasize that. In this formula, Medicaid payments can be seen as a type of insurance benefit that reduces out-of-pocket costs. What matters is the net out-of-pocket costs.

Remember that Medicaid helps the poor and comes with its own restrictions and rules. Medicare, the source of health insurance for most people over the age of 65, does not cover the cost of long-term care.

There are many considerations involved in choosing between self-financing and insurance coverage. These include age, health, the ability to get help without burdening family and friends, the level of wealth and how they relate to Medicaid eligibility, legacy goals, and the economics of unknown long-term care costs. Risk tolerance associated with impact, and the costs and benefits of different types of insurance.

This has a lot to consider and is worth discussing these issues with a financial expert, and in some cases other family members can be included in the discussion.

By creating a plan and sharing it with your family, you can avoid misunderstandings about providing and paying for care. Also, make sure your family knows about the funds secured and insurance policies designed to support care in case you become incapacitated when a need for care arises. is needed. You can also discuss with your family about getting premiums paid so that you don’t unintentionally take out insurance if your cognitive decline begins to begin.

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The amount of funding required for long-term care depends on the type of scenario you want to financially prepare for future processing. When and how long a long-term care event can occur, what will happen, out-of-pocket costs for long-term care, how much other budget spending will be reduced if long-term care is needed, long-term care What is the inflation rate and overall price level, and the discount rate used? How to return future costs to the reserves needed today?

Again, these are issues that financial professionals can help you tackle.

A silver lining that helps you budget for long-term care is that some of your money can come from the loss of other costs when you move to a facility for long-term care. If you’re spending $ 90,000 on nursing home care, some of the other costs in your budget will either be reduced or covered by the cost of care.

For couples, one spouse may require long-term care at the facility and the other spouse may be at home on a similar overall budget. However, if you are anticipating long-term care events for both spouses, at some point you may not have a family home and much of your existing budget may be devoted to long-term care. By so relocating part of the existing budget, the need for additional reserves may be less than expected.

Still, for those who want to plan the possibility of handling multi-year life in a nursing home, they may need to reserve hundreds of thousands of dollars to cope with this contingency.

Wade D. Pfau is the Program Director of the Retirement Income Certified Professional Program at the American College of Financial Services in King of Prasha, Pennsylvania. He is also the principal of RetirementResearcher.com. This is his book “Retirement Planning Guidebook: Navigate Key Decisions for Successful Retirement“.

Opinion: How do you think about the risk of high costs for long-term care?

http://www.marketwatch.com/news/story.asp?guid=%7B20C05575-04D4-B545-7709-40518CCE3BDA%7D&siteid=rss&rss=1 Opinion: How do you think about the risk of high costs for long-term care?

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