Long-Term Care Insurance
You can't predict your health care costs in retirement, but you can plan for them. Use these tips to prepare for covering potential long-term care insurance costs.
Long-term care is a blanket term for the various services (medical and non-medical) required by people who are too chronically ill or infirm to take care of themselves.
Some people pay for long-term care as they need it, some purchase long-term care insurance in advance, some rely on spouses and family to provide care, and others combine these resources.
Paying for long-term care can be challenging, mostly because you don't know if, when, or how much of it you may need. Taking stock of your resources can help with planning.
A good place to start when estimating how much money you can devote to long-term care is by asking these questions:
- Can you reserve a percentage of your savings, investments, home equity, or retirement funds to pay for care?
- If you purchase long-term care insurance, will you be able to afford the premiums for the rest of your life?
- If you or your spouse depletes your assets, will the other remain financially secure?
Next, have a candid talk with your family. If the need for long-term care arose, would your spouse, children, or other family or friends be willing to provide:
- Hands-on care. Which family member would be the primary caregiver? Would this require a move by you or the caregiver?
- Financial support. Will your family chip in to purchase long-term care insurance?
- Care and support. If one or several family members were the caregivers, would the others contribute financially? If so, how much?
Getting family to commit to these responsibilities can be a difficult conversation, but their time and contributions could greatly offset your long-term care expenses.
Long-term care insurance premiums vary widely, depending on factors such as the age, health, and gender of the purchaser(s) and where the insurance is purchased.
You'll have to weigh the expense of premiums against the risk that you might have to pay someone to help you with the activities of daily living, such as bathing, dressing, or eating. Currently, the average stay in a nursing home is 1 year,1 with an average annual cost of about $80,000.2 Also, keep gender in mind when deciding on long-term insurance coverage for you or your spouse; women outlive men by an average of seven years and need care longer (average 3.7 years vs. 2.2 years for men).
Bottom line? Long-term care insurance is expensive. But without it, extended long-term care could quickly deplete your nest egg.
1. Source: U.S Department of Health and Human Services, “How Much Care Will You Need?, longtermcare.gov, retrieved 07/24/2015”
2. Source: America’s Health Insurance Plans, “Guide to Long Term Care Insurance”, 2013.
Source: "Retirement and Health Insurance—What You Need to Know" by Rande Spiegelman, October 23, 2013.
Long-term care insurance benefits may be subject to limitations, waiting periods, exclusions, and terms for keeping them in force. Please ask us for full details and cost information.
Charles Schwab & Co., Inc. ("Schwab"), in association with the Small Business Insurance Agency (SBIA), provides customers with access to term life and long-term care insurance issued by highly rated insurance companies. Schwab and SBIA are licensed insurance agencies.
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. Where specific advice is necessary or appropriate, Schwab recommends that you consult with a qualified tax advisor, CPA, financial planner, or investment manager.
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