Q: My spouse and I are in our early 60s, without children, and are concerned about the risk of needing care in the future. Do you think most couples who can afford it should consider buying long-term care insurance?
A: Unplanned, uninsured care needed may be the greatest risk to our assets as we age. When deciding whether or not to buy long-term care insurance, one should consider the potential cost of care, the cost of insurance premiums and of course the coverage provided.
Is Long-Term Care Insurance a Good Idea?
There is a good possibility that you or your spouse will eventually require some form of long-term care (LTC). According to the Centers for Medicare & Medicaid Services, at least 70 percent of people aged 65 or older will require some form of long-term care services and support during their lives.1
Whether you or your spouse will be among this group is impossible to predict. But it is wise to consider how you might pay for long- term care and whether long-term care insurance is a good idea for you.
Cost of Care
Perhaps the first consideration is determining the potential cost of long-term care. Below is a summary of current costs according to the Genworth 2017 Cost of Care Survey.
Median costs in the United States:1
• $235/day for a semi-private room in a nursing home
• $267/day for a private room in a nursing home
• $3,750/month for care in an assisted-living facility (for a one-bedroom unit)
• $135/day for a home-health aide
• $131/day for homemaker/companion services
With health care costs rising every year, these expenses can be expected to grow substantially over time. Furthermore, neither Medicare nor Medicare supplemental coverage, also known as Medigap insurance, typically covers long-term care. Medicaid will cover a large share of such services, but only if you meet stringent financial and functional criteria. What’s more, most employer-sponsored or private health-insurance plans follow the same general rules as Medicare. Therefore, most people who need long-term care must pay for some or all of it on their own.
Cost of Insurance
Like life insurance, long-term care insurance policy premiums largely depend on your age and health. If you take out a policy when you are young, you can expect to pay comparatively low premiums during the life of the plan, while starting a new policy when you are older will entail significantly higher monthly premiums.
Most long-term care policies sold today are federally tax qualified, which means the premiums paid and out-of-pocket expenses for long-term care may be applied to the medical-expense deduction of the federal tax code. (For tax year 2018, seniors may deduct the portion of medical and dental expenses that exceed 7.5 percent of adjusted gross income.) Additionally, long-term care benefits received are not taxed as income up to certain limits. Consult with a tax advisor to learn more about the tax implications of long-term care insurance.
Long-term care policies are complex and vary widely. But in general, long-term care insurance typically covers the following:
• Nursing home care
• Adult day care
• Visiting nurses
• Assisted living
• In-home assistance with daily activities
LTC includes a range of nursing, social and rehabilitative services for people who need ongoing assistance due to a chronic illness or disability. LTC insurance can be used by anyone at any age who suffers an accident or debilitating illness, but it most frequently is used by older adults who need assistance with essential physical needs, such as bathing, dressing or eating.
Deciding whether to purchase long-term care insurance, and which type of policy to purchase, will depend on your personal situation. You may want to consider your family health history, your level of assets to potentially pay for long-term care and your feelings about relying on family members for support. Probing these and other individual circumstance can help you make a well-informed decision.
1Source: Genworth, 2017 Cost of Care Survey, 2017.
Jeremy R. Gussick is a CERTIFIED FINANCIAL PLANNER™ professional affiliated with LPL Financial, the nation’s largest independent broker-dealer.* He is also Certified in Long-Term Care (CLTC).® Jeremy specializes in the financial planning and retirement income needs of the LGBT community and was recently named a 2018 FIVE STAR Wealth Manager as mentioned in Philadelphia Magazine.** He is active with several LGBT organizations in the Philadelphia region, including DVLF (Delaware Valley Legacy Fund) and the Independence Business Alliance (IBA), the Philadelphia Region’s LGBT Chamber of Commerce. OutMoney appears monthly. If you have a question for Jeremy, you can contact him via email at [email protected]
Jeremy R. Gussick is a Registered Representative with, and securities and advisory services are offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC.
This article was prepared with the assistance of DST Systems Inc. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This communication is not intended to be tax advice and should not be treated as such. Please consult me if you have any questions.
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*As reported by Financial Planning magazine, June 1996-2018, based on total revenues.
**Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2018 Five Star Wealth Managers.