When I was five years old, I was afraid of the dark. As one of five kids, I didn’t get much sympathy. I was told to “buck up” and go to bed. So, I taught myself how to go to sleep fast and with the lights on. I haven’t had a fear of anything like the dark until three years ago when I became a financial advisor. Like many who came before me, I thought my primary worries would revolve around asset allocation and picking the right investments for my clients. What I quickly realized was that there was more to advising and helping clients than just investments. I had a responsibility not only to help build my client’s wealth, but also to preserve it. And I have discovered that a personal wealth is not destroyed near as much by financial markets as it is by long-term care costs. Now, what keeps me awake is thinking about how few people plan for how they would handle a long-term care need.
Misconceptions About Long Term Care
What do I mean by long-term care? This type of care is required when you are no longer able to perform normal daily activities for yourself like bathing, dressing, and eating. There are numerous misconceptions when it comes to long-term care. Many people associate it with nursing homes; however, it could take place at home or in assisted living facilities as well. Another common misconception is that people think it is an “old” person issue; however, according to a study by Georgetown University, 41% of people receiving long-term care are under the age of 65. The U.S. Department of Health and Human Services estimates that at least 70% of people over 65 will require long-term care at some point. The national average for costs of long-term care is between $1,500 and $7,800 a month, expenses typically not covered by Medicare or most private insurers.
The Options That Are Available
The good news is that there are options to help families protect their wealth and ensure quality care. There are a number of insurance options available, and they vary by state. Some long-term care insurance is similar to car insurance where you pay for the coverage; however, if you do not use it, you do not get any benefit. These plans are relatively inexpensive, and if they are part of a Medicaid Partnership within your state, they provide other protections on your estate as well. Long-term care insurance can also be attained as a rider on some whole life insurance policies. This coverage is more expensive, but you may have the ability to access your premiums paid should you not need the long-term care component.
I urge all of my clients, no matter how old, to consider long-term care as part of their overall financial strategy. In addition, for my younger clients, I ask them to have conversations with their parents about their long-term care coverage. I understand that no one under the age of 65 wants to think about being unable to take care of him or herself; however, just like with most insurance, when you really need long-term care, you will not be able to purchase it. It is best to make plans in advance and have potentially uncomfortable conversations now, so that you and your loved ones can sleep at night knowing you have protected your family against a large wealth killer.
Looking for some great resources to determine costs and options for long-term care? Here are a few of the best:
- Genworth Cost of Care App
- John Hancock Cost of Care App
- US Department of Health and Human Services
- Federal Long Term Care Insurance Program