Many Lockheed employees might be looking for ways to protect their nest egg once they move into that “work optional” period of life many call retirement. One of the biggest issues that can put a strain on a retirement income plan is long-term care (LTC) expenses. But many still ask themselves “Do I need long-term care insurance?”
What is considered long-term care?
Long-term care can come in many different forms. According to the National Institute of Aging long term care is defined as “a variety of services designed to meet a person’s health or personal care needs during a short or long period of time.” Many times long-term care is not really a medical need, but help with ADLs – or activities of daily living. These are things like bathing, dressing, using the restroom, eating, etc.
The most common type of long-term care facility you might be familiar with is an assisted living center (I don’t like the term “nursing home,” but many times assisted living and nursing home are used interchangeably). There are also many retirees that receive long-term care in their own homes.
What is long-term care insurance?
Basically, long-term care insurance is a pool of money that you can access if you have a long-term care need. For example, you might pay $250/month (this varies by age, health history, geography, etc.) for access to $500,000 of long-term care insurance. Policies vary, but some are limited to the amount they can distribute each month or year. These types of policies are very similar to your auto insurance. If you don’t have a “crash” or LTC need, you don’t get any of your premiums (the monthly $250 in my example) back.
Other types of long-term care insurance policies out there might give you some sort of death benefit or cash value. These hybrid-type policies are becoming more popular but can be more expensive.
Who needs long-term care insurance?
The short answer is once again…it depends. I’ve reviewed financial plans with new clients in their 40s that have been sold long-term care insurance by their insurance sales buddy they went to college with. They probably could have waited (and not paid the monthly premiums) for 10+ years and still paid around the same amount.
The best way to figure out if you or your spouse needs long-term care insurance is to see how a long-term care expense might affect your retirement goals. A financial advisor can run some of these calculations for you.
How to figure out if you need LTC insurance
When working through a retirement plan with clients, I like to figure out the average cost of long-term care in their area and put in a 3-4 year expense in their income plan. If they can pay for the medical expense without disrupting their long-term financial goals, then they probably don’t need the insurance.
If your retirement income plan fails to provide you income for the rest of your life when you put in the extra medical expense, you might want to at least explore getting more coverage.
Doesn’t Medicare pay for long-term care insurance?
No – unfortunately, Medicare only pays for medical needs so it won’t cover things like help with eating, bathing, and dressing. So in most cases, long-term care expenses are not covered. Medicare will cover skilled nursing care while you recover from an injury or illness but just for a short period of time.
Long-term care insurance is not for everyone, but everyone needs to see how a long-term need in retirement might affect the big picture. If you need help to find out how long-term care might affect your retirement goals, feel free to email me at Brian@TheAeroAdvisor.com.
