Retiring is a step that seniors look forward to. Working days will have ended, and you can begin to live on the money you have saved in various retirement accounts over the years. There are plans to fulfill and trips to make. While no one wants to consider the need for long-term care—have you included it in your retirement planning?
Although no one knows whether or not long-term care will be needed, as many as 70 percent of 65-year-olds are likely to need it. It is costly, and you need to prepare for it.
The Cost of Long-Term Care
Prices for long-term care will vary between areas, but you can expect it to be expensive. RamseySolutions says that the average cost of long-term care is $172,000 while individuals with dementia could see that figure could rise to $367,000.Every year, because of inflation, costs rise, meaning that premiums also rise. Women will pay more for premiums because they live longer than men. A rider— a policy that causes benefits to rise with inflation—can help you meet the costs of rising inflation, but it will make your premiums higher.
Types of Long-Term Care Services
Long-term care does not refer to a single type of service. There are several kinds, but the most common is at-home care. Most long-term care occurs at home with family members and unpaid people caring for their loved ones. Some people only need part-time care or supervision and may attend an adult daycare. Others may need care in a facility after a fall or other serious health issues. Another kind may depend on in-home supervision and care by professional medical staff such as a nurse.The National Institute of Aging says some people may need home health care after an accident or illness. It may include speech, physical, or occupational therapy, help bathing and getting dressed, and is often provided for by Medicare.
Long-Term Care Coverage
One way to reduce the cost is to get long-term care insurance. Like other insurance policies, you buy long-term care coverage—and when needed, the insurance company pays a good portion of the bill. Because it does so, it can help save your money and your assets.Medicare and Medicaid and Long Term Care
Although it may surprise many people nearing retirement, Medicare does not pay for costs related to long-term care, nor does Medigap. It might cover up to 100 days of service after a stay at a hospital, but it likely will not include personal care.Medicaid is a federal long-term care program that will help pay for long-term nursing home care for people with limited income. They will also help with at-home care. Coverage will vary between states, but all states provide some level of care through the program.
The American Association of Retired Persons (AARP) says that before Medicaid will pay anything, you need to just about eliminate your savings and most of your other assets. Your home and car are usually protected.
Long-Term Care Options for Seniors
When thinking about buying long-term care coverage, you have several options. The traditional kind of coverage provides for the costs involved with care at home or in a special facility.Hybrid long-term care insurance, LifeHappens says, combines the benefits of a life insurance policy and long-term care. If you do not need long-term care, your beneficiaries get the proceeds from your life insurance.
A third kind of long-term care coverage is based on a life insurance policy. If necessary, a rider is added to the policy to provide long-term care. The rider enables you to draw on some of the life insurance proceeds while you are still alive to cover some of the long-term care costs.
Tax Benefits When Buying Long-Term Insurance Benefits
Paying for long-term care premiums can give some people tax benefits. The cost of premiums is tax deductible when you have a government-approved plan. Bankrate mentions that employed people may not be able to claim the deduction when they are younger because it comes under ordinary tax deductions—which must be more than 7.5 percent of your adjusted gross income to claim. As you near your senior years, however, your medical costs combined with your cost of long-term care coverage may exceed 7.5 percent.Self-employed people will benefit immediately because the cost of health and long-term care insurance—comes off the top. It is placed on line 29, automatically reducing your overall income.
The different states will often enable you to get tax deductions for the cost of your long-term care insurance premiums. The amount will vary between states, so you need to determine what deductions your state permits.
Tax Deductions From the Long-Term Care Insurance Benefits
When you receive benefits from the plan, many of those benefits are also tax deductible. The Wall Street Journal says that the benefits you get from the insurance policy may also be tax deductible. The qualifications are that the individual must be certified as being “chronically ill” by a medical professional within the previous 12 months. The term is defined as someone unable to perform at least two daily activities—eating, getting dressed, bathing, and continence.Your retirement plans should include some form of long-term care. Talk to a professional financial counselor about the type of plan that best suits your needs. Remember that it is costly, and the more you can save toward that day—the more protection you will have of your assets and money.
The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
