Long-Term Planning, it’s about Retirement!Submitted by QSSA - Better Financial Solutions for Life on August 28th, 2018
Okay, your thinking about retirement and all the wonderful things you’re looking forward to. That’s great! Dream Big!
In order to ensure a successful retirement you need a plan and I hope you use a professional!
After you contemplate all the important questions about what you want to do in retirement, where do you want live, do you want to travel, start a business, etc? Then you need to gather and organize all your financial information (income sources, assets to supplement your lifestyle, and anticipated expense) and you begin to develop a plan.
As you start developing your plan you’ll realize that health-care cost can be a significant element of your plan. Paying for health care can be one of the largest expenses for people in retirement. According to Fidelity's Retiree Health Care Cost Estimate, a 65-year-old couple retiring in 2016 will need an estimated $260,000 to cover health care costs in retirement and Long-Term Care Insurance Could Add an Additional $130,000 per person/per year
This can be scary and daunting but plan and don’t worry. After breaking it down you’ll see that it is manageable and careful planning can ease your anxiety about retirement health-care costs and enable you to enjoy retirement.
It is pretty straightforward to effectively estimate medical costs. You have your insurance premiums (Medicare Part B & Part D), any additional insurance cost (supplement or advantage) and your co-pays. However, it can be a little tricky budgeting for long-term care expense and if it is not considered carefully this can break your budget and put a lot of stress on you, your family and your loved ones. If you plan appropriately, you can maintain choices, live a fulfilling life, leave a legacy and allow your family the ability to direct your care not provide it. Including long-term care expenses as part of in your retirement plan can relieve stress and allow you to live life to the fullest.
The average and typical nursing home stay is approximately 2.5 years (2.6 female/2.3male) and the estimated cost of Long-term Care can be better than $100,000/year. These costs may be high in New York and other parts of the county and, depending on other factors and your choices. In 2015 it was estimated that you would need to accumulate at least $3 million to be able to self-insure for long-term care. That’s a lot of money, so where does this money come from? How do you start developing a plan to address long-term care without breaking the bank and with affording your desired lifestyle?
Use the experience of others and get the facts that are relevant to your situation.
- Where will you live?
- What local services are available?
- How long do you want to stay in your home?
- How much care did others you know need?
- Do you have a support network that is willing and able to help out?
- How will you pay for care?
- Do you have legal documents set up that address your needs and wishes?
Develop a long-term care plan. It is my experience that today many individuals are planning to co-insure to cover a Long-term care event. This allows you the ability to retire on to your terms, protect their assets and remove stress for your loved ones.
The long-term care market has changed dramatically over the years and there are fewer companies offering dedicated long-term insurance; however, there are many new products at your disposal to accomplish your needs. All these products require underwriting. If this is going to be an obstacle for you then you should look at using an elder-law attorney and consider a combination of legal and tax maneuvers to establish a workable solution for you.
- Long-term care insurance – This market has changed significantly over the years. In the big scheme of things, these products may be price competitive solutions to accomplish your needs. Realize that unless you buy a return of premium rider, long-term care insurance is a use it or lose it product and you only receive a benefit if you use the policy. Other policy options may include a cash benefit and shared care options that allow benefits to be used by both spouses. The policy should include home care and assisted living care, joint waiver of premium, waiver of premium, an inflation rider and other options to suit your needs.
- Combination Life insurance and Long-term Care insurance. These policies are becoming more and more popular and combine the benefits of both policies. Somebody will always receive a benefit and the policies will pay out benefits depending on your needs with the residual value being paid out as a death benefit.
Generally, the client puts a lump sum down ($50,000 - $200,000) depending on the policy design. Then the policyholder may pay no or a limited term (10 yrs) premium for the policy. This is a nice alternative, which allows you to leverage an existing asset or policy, and utilize a tax-free rollover. You can roll over the cash value of an existing cash value life policy into the new policy. Thereby leveraging your cash value to replace your existing life insurance with a new policy with a long-term care benefit.
- Annuities – If your state allows long-term care annuities this can be a good and qualifying asset with tax advantage benefits. It may even allow a couple to qualify for Medicaid benefits if the right product is used and it is set up correctly. Generally, in New York State, the applicant/recipient must name New York State as the first beneficiary for at least the amount of Medicaid paid on behalf of the annuitant. Some states will allow you to set up a Medicare-compliant annuity and other states will allow you to set up long-term care annuities. These products availability vary by state and generally are not transferable across state lines. Please consult an attorney and long-term care specialist when purchasing annuities so you understand the financial impact regarding long-term care.