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Presented by MidAmerica Financial Resources. You can reach them at 618.548.4777 or greg.malan@lpl.com or on the web at www.mid-america.us

 

How Much Do You Really Know About Long-Term Care?

How Much Do You Really Know About Long-Term Care?

Separating some eldercare facts from some eldercare myths.

Provided by MidAmerica Financial Resources

 

How much does eldercare cost, and how do you arrange it when it is needed? The average person might have difficulty answering those two questions, for the answers are not widely known. For clarification, here are some facts to dispel some myths.

 

True or false: Medicare will pay for your mom or dad’s nursing home care.

FALSE, because Medicare is not long-term care insurance.1

 

Part A of Medicare will pay the bill for up to 20 days of skilled nursing facility care – but after that, you or your parents may have to pay some costs out-of-pocket. After 100 days, Medicare will not pay a penny of nursing home costs – it will all have to be paid out-of-pocket, unless the patient can somehow go without skilled nursing care for 60 days or 30 days including a 3-day hospital stay. In those instances, Medicare’s “clock” resets.2

 

True or false: a semi-private room in a nursing home costs about $35,000 a year.

FALSE. According to Genworth Financial’s most recent Cost of Care Survey, the median cost is now $85,775. A semi-private room in an assisted living facility has a median annual cost of $45,000 annually. A home health aide? $49,192 yearly. Even if you just need someone to help mom or dad with eating, bathing, or getting dressed, the median hourly expense is not cheap: non-medical home aides, according to Genworth, run about $21 per hour, which at 10 hours a week means nearly $11,000 a year.3,4

 

True or false: about 40% of today’s 65-year-olds will eventually need long-term care.

FALSE. The Department of Health and Human Services estimates that close to 70% will. About a third of 65-year-olds may never need such care, but one-fifth are projected to require it for more than five years.5

  

True or false: the earlier you buy long-term care insurance, the less expensive it is.

TRUE. As with life insurance, younger policyholders pay lower premiums. Premiums climb notably for those who wait until their mid-sixties to buy coverage. The American Association for Long-Term Care Insurance’s 2018 price index notes that a 60-year-old couple will pay an average of $3,490 a year for a policy with an initial daily benefit of $150 for up to three years and a 90-day elimination period. A 65-year-old couple pays an average of $4,675 annually for the same coverage. This is a 34% difference.6

 

True or false: Medicaid can pay nursing home costs.

TRUE. The question is, do you really want that to happen? While Medicaid rules vary per state, in most instances a person may only qualify for Medicaid if they have no more than $2,000 in “countable” assets ($3,000 for a couple). Countable assets include bank accounts, equity investments, certificates of deposit, rental or vacation homes, investment real estate, and even second cars owned by a household (assets held within certain trusts may be exempt). A homeowner can even be disqualified from Medicaid for having too much home equity. A primary residence, a primary motor vehicle, personal property and household items, burial funds of less than $1,500, and tiny life insurance policies with face value of less than $1,500 are not countable. So yes, at the brink of poverty, Medicaid may end up paying long-term care expenses.4,7

 

Sadly, many Americans seem to think that the government will ride to the rescue when they or their loved ones need nursing home care or assisted living. Two-thirds of people polled in another Genworth Financial survey about eldercare held this expectation.4

 

In reality, government programs do not help the average household pay for any sustained eldercare expenses. The financial responsibility largely falls on you.

 

A little planning now could make a big difference in the years to come. Call or email an insurance professional today to learn more about ways to pay for long-term care and to discuss your options. You may want to find a way to address this concern, as it could seriously threaten your net worth and your retirement savings.

 

MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@lpl.com www.mid-america.us

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Securities and advisory services offered through LPL Financial, a Registered Investment Adviser, Member FINRA/SIPC.
MidAmerica Financial Resources and Malan Financial Group are separate and unrelated companies to LPL.

 

Citations.

1 – medicare.gov/coverage/long-term-care.html [6/5/18]

2 – medicare.gov/coverage/long-term-care.html [6/5/18]

3 – fool.com/retirement/2018/05/24/the-1-retirement-expense-were-still-not-preparing.aspx [5/24/18]

4 – forbes.com/sites/nextavenue/2017/09/26/the-staggering-prices-of-long-term-care-2017/ [9/26/17]

5 – longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html [10/10/17]

6 – fool.com/retirement/2018/02/02/your-2018-guide-to-long-term-care-insurance.aspx [2/2/18]

7 – longtermcare.acl.gov/medicare-medicaid-more/medicaid/medicaid-eligibility/financial-requirements-assets.html [10/10/17]

Life Insurance Products with Long-Term Care Riders

Life Insurance Products with Long-Term Care Riders

Are they worthwhile alternatives to traditional LTC policies?

Provided by MidAmerica Financial Resources

 

The price of long-term care insurance has really gone up. If you are a baby boomer and you have kept your eye on it for a few years, chances are you have noticed this. Last year, the American Association for Long-Term Care Insurance (AALTCI) noted that a 60-year-old couple would pay an average of $3,490 a year in premiums for a standalone LTC policy.1

 

Changing demographics and low interest rates have prompted major insurance carriers to stop offering standalone LTC coverage. As Forbes recently noted, about 750,000 consumers purchased long-term care policies in 2002; just 89,000 bought an LTC policy in 2016. The demand for the coverage remains, however – and in response, insurers have introduced new options.2

 

Recently, hybrid LTC products have outsold traditional LTC policies. Some insurers now offer “cash rich” whole life insurance policies with an option to add long-term care benefits. Other insurance products feature similar riders.2

 

As these insurance products are doing “double duty” (i.e., one policy or product offering the potential for two kinds of coverage), their premiums are costlier than that of a standalone LTC policy. On the other hand, you can get what you want from one insurance product rather than having to pay for two.3

 

Hybrid LTC policies provide a death benefit, a percentage of which will go to your heirs. If you end up not needing long-term care, you will still be able to justify the premiums you paid. You can also often add a rider to adjust the LTC benefits of the policy in view of inflation.4,5

 

The basics of securing LTC coverage applies to these policies. The earlier in life you arrange the coverage – and the healthier you are – the lower the premiums will likely be. If you are not healthy enough to qualify for a standalone LTC insurance policy, you still might qualify for a hybrid policy – sometimes no medical exam by a nurse is necessary.1,3

 

Hybrid policies have critics as well as fans. Their detractors point out the characteristic that puts off potential policyholders the most: lump sums are commonly required to fund them. An up-front payment in the range of $75,000-$100,000 is typical.4

 

Funding the whole policy with one huge premium payment has both an upside and a downside. You will not contend with potential premium increases over time, as owners of stock LTC policies often do. (Many retirees wish they could lock in the monthly or quarterly premiums on their traditional LTC policies.) On the other hand, the return on the insurance product may be locked into interest rates lower than you would prefer.4

 

Since the focus of a hybrid LTC policy is on long-term care coverage, the death benefit may be relatively small compared with that of a pure life insurance policy. Also, the premiums paid on hybrid policies are not tax deductible; premiums paid on conventional LTC policies are.4,5

 

Another reality is that many seniors have little or no need to buy life insurance. Their heirs will not face inheritance taxes, since their estates will not exceed estate tax thresholds. Moreover, their adult children may be financially stable. Providing a lump sum to these heirs is a nice financial gesture, but the opportunity cost of paying life insurance premiums may be significant.

 

Life insurance can play a crucial role in estate planning, however – and if a policy manages to combine life insurance and long-term care coverage feature, it may prove useful in multiple ways.

 

MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@lpl.com www.mid-america.us

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

  Securities and advisory services offered through LPL Financial, a Registered Investment Adviser, Member FINRA/SIPC.
MidAmerica Financial Resources and Malan Financial Group are separate and unrelated companies to LPL.

 

Citations.

1 – fool.com/retirement/2018/02/02/your-2018-guide-to-long-term-care-insurance.aspx [2/2/18]

2 – forbes.com/sites/howardgleckman/2017/09/08/the-traditional-long-term-care-insurance-market-crumbles/ [9/8/17]

3 – tinyurl.com/y94mm59c [3/16/18]

4 – consumerreports.org/long-term-care-insurance/long-term-care-insurance-gets-a-makeover/ [8/31/17]

5 – tinyurl.com/y7gbhr7u [10/9/17]

 

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