Retirement Planning 101: Five Long-Term Care Myths Debunked

10,000 American baby boomers are now turning 65 every day, and though most of them are healthy in their 60’s, many will begin to suffer major health issues in their 70’s. Diseases like cancer and Alzheimer’s take hold later in life, and most Americans will need long-term care at some point.

There are some common myths surrounding long-term care, and understanding reality will better prepare you for that eventuality.

1. There’s nothing I can do to plan ahead

The best strategy for reducing long-term care costs is to stay healthy for as long as possible, but there are some other steps you can take to minimize any future expenses.

First, consider buying a long-term care insurance policy. Its cost will depend on your age, health, and coverage options, but in 2013, the cost of $162,000 in insurance coverage for a couple ranged from $1,816 to $3,725 per year.

It may make sense to get benefits sooner rather than later because the availability of long-term care insurance depends on your health. Admittedly, these plans are not cheap, but if you’re under 65, you may be able to pay premiums with pre-tax money if you have a health savings account. If you own a business, you may qualify for special tax treatments as well.

Another option to consider is combination life and long-term care policies. These can offer both death benefits to survivors and insurance protection against long-term care costs. Additionally, strategies involving trusts and asset transfers can be useful, especially if implemented prior to the five-year period reviewed by Medicaid to determine eligibility.

2. I won’t need long-term care

Because life-altering conditions like cancer, Alzheimer’s disease, stroke, and arthritis tend to occur later in life, many people in their 60s underestimate the likelihood of needing long-term care. Their assumption, sadly, falls far short of reality.

The Department of Health and Human Services reports that 70% of those turning 65 this year will need long-term care in the future. While only 10% of long-term insurance claims are made by people under 70, 25% are for people in their 70s, and 64% are started by people in their 80s.

3. Insurance will cover long-term care

Medicare and private insurance may cover short-term care, skilled nursing, and medically necessary care, but they will not include custodial or personal care services, which represent a significant portion of all long-term care expenses. Medicare and private insurance won’t pay for assisted living, continuing care in retirement communities, or adult day services.

Medicaid will cover long-term care, but qualifying for it is a major challenge for many retirees. Eligibility rules can vary across states, but only those without assets and with limited income typically qualify.

4. My savings will cover my long-term care

On average, people retire with a median of $131,000 in retirement savings, a total that will fall short of long-term care needs. Genworth’s 2016 Cost of Care Survey reports the average assisted living facility costs $43,539 annually, while the average nursing home costs $82,125 per year. 50% of people require long term care for over one year, and the average length of a long-term insurance claim for them is 3.9 years. Add in the fact that cost of long-term care is rising, and it’s not realistic to expect retirement savings to pay for these costs by themselves.

5. Medicaid can’t touch my home

If you do in fact qualify for Medicaid, and Medicaid covers your long-term care, federal statute requires states to recover the money spent on your care by Medicaid from your estate when you pass away. While laws can vary, the majority of states include real and personal property in your estate.

Medicaid won’t force your spouse to sell your home if you pass away, but it can put a lien on your house after your spouse passes.

Legal and Tax Guidance for any Scenario

Rules can vary by state, so it is helpful to discuss your options with experienced attorneys before making any decisions. Cohen & Burnett offers a holistic approach to retirement planning that covers all legal and tax-related concerns. We provide clients with:

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