One of the main concerns for retirees is outliving their savings. Unfortunately, the high cost of long-term care is potentially one of the biggest expenditures in retirement. It is estimated that 60% of people will eventually need assistance with basic daily activities such as bathing, dressing, and eating. Although some people may be able to rely on care from family members or friends, many will have to pay for assistance. Care costs can vary depending on where you live, how intense your needs are, and how long you require it. It is important to know that Medicare does not cover long-term care (beyond some skilled care right after hospitalization for an injury or illness).
Long-term care is available through Medicaid (a joint federal and state program covering low-income Americans); however, qualifying for Medicaid is difficult without exhausting most savings and other assets, and almost all states have established a five-year “look-back period” to determine eligibility for (and prevent abuse of) the program. A long-term care insurance policy may be an option to help with costs. However, these policies are often expensive, and coverage options vary. Policies often have waiting periods, exclusions based on certain conditions, or both.
Because of the expense, many people opt to self-insure. With self-insurance, an individual assumes the risk of covering those expenses using their accumulated assets to fund any long-term care expenses. This can be a viable option for individuals who have saved well for retirement but should be accounted for in your financial plan. A fee-only financial planner can help you review policy options and determine whether this type of policy makes sense for your situation.
Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Multnomah Group does not provide legal or tax advice.