Retirement Risk Series – Long-Term Care Risk

As people approach retirement age, they often start to think about their future and what kind of care they may need as they age. Long-term care is an important consideration for retirees, as it can be costly and can quickly drain their retirement savings. In this blog post, we'll discuss the risk of long-term care in retirement and what steps retirees can take to mitigate this risk.

What is Long-Term Care?
Long-term care refers to a range of services that help people to meet their daily needs when suffering with a chronic illnesses or disability. This type of care can be provided in a variety of settings, including nursing homes, assisted living facilities, and in the home. Long-term care can include help with daily activities such as bathing, dressing, and eating, as well as medical care and supervision.

The risk of needing long-term care is high, particularly as people age. According to the U.S. Department of Health and Human Services, almost 70% of people turning 65 will need some form of long-term care in their lifetime. The risk of needing long-term care is also higher for women, as they tend to live longer than men.

Long-Term Care Costs
Long-term care can be expensive, and the cost varies depending on the type of care needed and if care is in a facility or in the home. According to a recent survey (2021), the median monthly cost of a private room in a nursing home in the United States is $9,125. The median monthly cost of assisted living is $4,300, and the median hourly rate for a home health aide is $25.

These figures will vary depending on geographic location and level of desired care. However, no matter where you live, long-term care is expensive.

Long-Term Care Insurance
One way to mitigate the risk of long-term care in retirement is to purchase long-term care insurance. This type of insurance can help cover the costs of long-term care, including nursing home care, assisted living, and in-home care. However, long-term care insurance can be expensive, and not everyone will qualify for coverage.

Retirees should consider purchasing long-term care insurance earlier rather than later, as the premiums tend to be lower for younger individuals. Additionally, some employers offer long-term care insurance as a benefit, so retirees should explore their options before retiring.

Long-term care insurance has one significant drawback, though. Most long-term care policies are a “use it or lose it” proposition. It can feel disheartening to pay for something for a long time, that you hope you never have to use.

Using Life Insurance to Pay for Long-Term Care
A cash value life insurance policy may be a better option to pay for long-term care ex0nese. One option that many people may not be aware of is the life insurance accelerated death benefit, which can be used to pay for long-term care. An accelerated death benefit is a provision in a life insurance policy that allows policyholders to access a portion of their death benefit while they are still alive. This benefit is typically available to policyholders who have been diagnosed with a terminal illness or a condition that requires long-term care. The amount of the accelerated death benefit will depend on the terms of the policy and the severity of the illness or condition.

Long-term care is a significant risk in retirement, and retirees should take steps to mitigate this risk. This may involve purchasing long-term care insurance, planning for long-term care costs in their retirement plan, and considering alternative options for care. By taking these steps, retirees can help ensure that they are prepared for the potential costs of long-term care and can enjoy a secure retirement.