According to a 2010 survey completed by MetLife Market found that the chief concern was about having enough steady income and reserves to cover expenses at retirement and the cost of senior health care, as reported by 32% of respondents surveyed. This is regardless of whether they plan to retire earlier, later, or the same time as expected.
The Statistics are Alarming
- 1 in 3 Chance that a senior will enter a nursing home
- 1 in 10 Chance that an individual 55+ has long term care insurance
- 2 in 3 Chance that a senior citizen will become physically or cognitively impaired in their lifetime
- Average cost to stay in a US nursing home for one year: $76,680
Regardless of whether you are concerned about immediate long-term health care concerns or instant financial pressures, or just simply studying your alternatives for the here are a few possibilities to consider The bottom line is the costs for ongoing long-term care services provided at home, in an assisted living facility, or in a nursing home can be substantial and can adversely impact one’s retirement. Long-term care insurance is the only insurance designed to help cover the costs of long-term care services. Without it, many or all of the costs are out-of-pocket So Where do you source those expenditures and avoid being a burden to family members?
Long Term Care Programs Available
Medicare is the federal program that helps pay hospital and medical costs for those who are 65 or older and some disabled persons. It provides very limited coverage for short periods of time for nursing home and home health care but does not cover any long-term care services for extended periods of time.
Medicaid, also known as Medical Assistance is a government health care program paid for by state and federal governments. Medicaid is funded and administered through the states and is for low income families such as those who have no assets and have no extended family financial support. Financial eligibility for Medicaid nursing home and community waiver requires the recipient to be receiving SSI payments and/or be earning less than $2000 a month or $3000 for couples. If you can qualify, Medicaid will pay for most health care costs, including nursing home and community-based care. Principally Medicaid is for those who have exhausted all resources and are impoverished.
Long-term care insurance is an insurance product that covers the cost of long-term care not covered by health insurance, Medicare, or Medicaid. Most long-term care policies will pay a preset amount of an insured’s long-term care costs when the insured is certified by a licensed health care doctor as being perpetually ill. There are several types of policies available with the comprehensive policy being the best choice since we have no idea what type of care we will need. Policy types include: comprehensive, facility-only, and home care-only. Currently there is not an age requirement for long Term Care Insurance. Yet, age and health are the primary factors that impact insurability and cost of the annual premium. The best time to buy long-term care insurance is between the ages of 45 to 55 before you have a medical condition that could impact policy premiums. Once you become uninsurable you will have to investigate other options.
Veteran Benefits You can receive a monthly pension if you are a wartime Veteran with limited income, and you are permanently and totally disabled or at least 65 years old. There are two types of U.S. veterans:
Compensation benefits- is a benefit provided to veterans that have suffered a disability as a result of their military service.
Pension benefits-they are available to veterans with limited or no income that served during a war period. Pension benefits can help veterans and their surviving spouses to cover a large portion, if not all, of their medical and eldercare costs.
Aid & Attendance- Additionally veterans who are more seriously disabled may qualify for Aid and Attendance or Housebound benefits. These are benefits that are paid in addition to the basic pension rate
Self-Funded Capital Getting Creative
A life settlement is a financial transaction in which the owner of a life insurance policy sells an unneeded policy to a third party for more than its cash value and less than its face value., for those that didn’t let their polices go there is an option. Most all types of life insurance contract can be used for a life settlement. The proceeds from the settlement can be used to pay for in-home care, assisted living or nursing home care that’s necessary right now.
A reverse mortgage is a loan for seniors age 62 or older that allows them to convert a portion of their home equity into cash. The homeowner does not have to repay the loan as long as they remain in the home as a principal residence consequently, as the loan debt continues to grow the remaining equity will be reduced over time.. A reverse mortgage is currently only available under the government Home Equity Conversion Mortgage (HECM) which is the Federal Housing Authorities (FHA) reverse mortgage program, making it a safe alternative for seniors who may be cash poor and house rich.
A borrower or borrower’s heirs however will never owe more than the home is valued for, appraised at or sold for at the time it is repaid. Some personal finance professionals regard reverse mortgages as options of last resort – to be used only by seniors facing dire circumstances and who have run out of other options however, as more and more baby boomers retire realizing retirement accounts have depreciated, reverse mortgages are becoming a more mainstream option for both retirement and long term care planning.
Medicaid Planning– Medicaid estate planning is a financial strategy used by some financial planners in order to assist a client with meeting eligibility requirements for Medicaid to both protect assets and pay for long term care benefits. Medicaid rules do not allow for assets to be given away in order to qualify. In 2005 Congress passed the Deficit Reduction Act to change the Medicaid asset transfer rules to prevent or reduce the ability of Medicaid planning by financial planners to artificially impoverish Medicaid applicants. The2005 Act implements a five-year “look-back” period, which means that Medicaid will examine all your financial dealings for at least the past five years. If you transferred or gifted money to anyone during those five years, you will be penalized and trigger a Medicaid ineligibility period. Although frowned upon, in some instances financial instruments, namely annuities and trusts, have been used to reduce countable assets to enable individuals to qualify for Medicaid speak with a elder attorney or financial planner before moving assets to qualify for Medicaid.
Senior care and retirement planning solutions can be exhausting but it is crucial to be aware of your options for funding an unexpected expense like Long Term Care even if it’s simply in home care for you or a spouse. I believe with this information you will be successful in finding a solution that works for you. The more options you discover, the less likely you are panic.
