It may not be especially nice to think about, but the fact is that as we all keep living longer, our likelihood of requiring long-term care is increasing, too. What that care looks like and how long we need it for are, of course, unique to every individual. But what’s true for many of us is that, financially speaking at least, we’re not as prepared as we could be.
So, if you haven’t yet started your own financial preparations for long-term care, you’re certainly not alone. And the good news is it’s not too late either.
Here are four steps you can take today to get your long-term care planning on track.
1. Communicate your plans with your loved ones.
Whether it’s a family member, relative or close friend, be sure to discuss your plans for long-term care with the people closest to you. In particular, think about the role everyone can have — one that makes them feel involved but also plays to their strengths.
For example, maybe your spouse will oversee actually paying your care bills, but one of your kids or a close friend is going to visit you every day for a coffee and a chat.
Be sure to regularly check that you have the right people named as beneficiaries and/or with access rights for your insurance contracts, too.
2. Figure out if you can self-fund.
As an American citizen, you’re entitled to long-term care that is paid for by the government. However, as you might expect, the standard of care in a public Medicaid facility can be quite different from what you may receive if you pay to go private.
Review your finances and, if you’re in a position to self-fund, start actively preparing to do so now.
3. Find the right saving option for you.
If you’re going to self-fund, there are a few different ways to go about it.
- Standalone long-term care insurance. The premiums for these plans tend to be cheaper than for hybrid ones (more on those in a moment). However, they can be used only to fund long-term care, so if you don’t end up needing it, the money is essentially lost. (Some standalone products allow spouses to be covered by the same contract, increasing the chances that one of you will use it.) The reimbursement rules can also be challenging from a liquidity perspective, as they require you to pay for the care yourself, then submit receipts to recover the cost.
- A life insurance contract that contains a long-term care rider. These cover both your life insurance and long-term care benefit in a single plan. Consequently, the premiums are more expensive than a standalone product, but the upside is that if you don’t end up using the money for long-term care, it’s simply passed on to your stated beneficiaries when you die. If the rider is used, it is paid out as an acceleration of the death benefit until either the benefit amount is exhausted or upon your death.
- Create your own “long-term care bucket.” Rather than paying for insurance coverage, you could use some other investment program or annuity contract to save for long-term care. Over time, such funds can grow considerably without any restrictions on how you use the money. However, you’ll need enough liquidity (and discipline!) to ensure you pay into the fund regularly for a number of years.
4. Consult a professional.
Selecting the right insurance coverage or savings plan from the various options available can be a complicated process. A qualified financial professional will help you sort through the details, make the complex simple and assist you in determining the approach that works for you. They can also help you integrate long-term care preparations into your overall financial plan.
Whatever the right long-term care plan for you, the most important thing is to have one. The sooner the better, too, because the earlier you start saving, the bigger your pot will be if and when the time comes.