Planning for long-term care may not be the most exciting aspect of your retirement portfolio, but it is perhaps one of the most necessary steps to take in protecting your financial future. Studies show that 68 percent of people will need long-term care at some point in their lives, yet despite those statistics, Forbes.com reports that less than a quarter of the Baby Boomer generation has long-term care insurance in place.
It is difficult to predict today whether you might someday require a nursing home or in-home care as you age, but you can put a plan in place to cover the expenses of any long-term care (LTC) you may need. Failing to plan for LTC is the single greatest threat to your retirement savings and the success of your retirement plan.
So what are your options?
Traditional long-term care insurance is perhaps the most well-known option, but can be expensive, and with the potential for rate increase and the possibility of paying so much (about $3,500 annually for a 55-year-old-couple) for something you may never need, LTC insurance quickly loses its appeal.
A better option may be to shift the LTC portion of your portfolio into an asset-based LTC plan, where you’ll have the potential to generate as much as 9x your money in tax-free benefits, allowing a tax-free distribution to pay for long-term care.
An asset-based LTC plan is a life insurance policy or annuity that allows you to use the death benefit or cash value to cover the costs of long term care — and not just nursing home care. You can apply these funds to home-based care and assisted living. An asset-based plan allows you to build cash value in case you change your mind or don’t need the insurance, or you can leave the death benefit in place for your heirs.
There is an LTC option to fit almost any budget. We generally discuss LTC options in terms of three tiers: Platinum, Gold and Silver.
Platinum — An asset-based plan that offers tax-free benefits and allows you to accumulate cash value. There is an unlimited benefit time period with an asset-based plan and inflation protection is available.
Gold — This tier includes tax-free benefits and works like a reimbursement plan, which gives you flexibility to spend as you wish.
Silver — The most affordable LTC plan available. While tax-free benefits remain, there is a fixed dollar amount able to be paid out for a maximum number of months.
The general rule of thumb is to purchase as much LTC coverage as you can afford. Every person’s financial situation is unique however, so we encourage you to contact the retirement and LTC insurance experts at Dewitt & Dunn Financial Services so we can help you build out a balanced portfolio to protect your financial future and ensure you have the necessary funds in place to cover any long-term care expenses you may need as you age.