Facing the Future: Planning for Long-Term Care

Let's be honest. Most of us don't like to think about needing help with simple daily tasks. This includes things like bathing or dressing as we get older.

But the truth is, nearly 70% of Americans turning 65 today will need some form of long-term care in their lifetime. And as many families learned during the COVID-19 pandemic, caregiving comes with significant emotional, physical, and financial costs.

So the real question is: Are you ready for it?

The U.S. Department of Health and Human Services says that most people need long-term care for about three years. Yet, many people still retire without a clear plan for what to do next.

Why It Matters

Long-term care can be one of the biggest threats to your retirement nest egg. Beyond the financial cost, it can deeply affect your loved ones. Many caregivers are also raising children, with 57% of family caregivers supporting kids under 18. Without a plan, the burden often falls on family—leading to stress, burnout, and strained finances for everyone involved.

Evolving Options for Care

Gone are the days when extended family members were the default caregivers. Today, long-term care usually begins at home with part-time help. It can then move to more support, like assisted living or full-time nursing facilities, based on health and mobility needs.

This change brings up an important question: Should you pay for future care yourself, or get insurance to protect yourself?

As Stefne Lynch, VP at Fidelity Insurance Agency, puts it: “It’s a choice between paying now for a risk that may not occur or waiting and potentially paying a much higher cost later.” She emphasizes that what may seem manageable in your 50s could look very different in your 80s or 90s—both for you and your family.

Long-Term Care Funding Options

When it comes to paying for care, there are four main options. Each option has its own pros and cons. These depend on your financial situation and personal goals.

1. Government Assistance

If you meet income and asset requirements, Medicaid or Veterans Affairs programs may help cover costs. However, eligibility is strict, benefits vary by state, and care options may be limited. Importantly, Medicare does not cover long-term care beyond limited short-term support.

2. Traditional Long-Term Care Insurance

These policies provide flexibility in choosing benefit amounts and durations, typically with annual premiums. But fewer insurers offer these today, and premiums can increase over time, making affordability a concern for some.

3. Hybrid Insurance Products

Hybrid policies combine long-term care coverage with life insurance or annuities. You can use the death benefit early to pay for care costs. If you don’t use it for care, your beneficiaries will still get a payout. While efficient, these policies can be complex and may have limited availability depending on your insurer.

Another option is a long-term care annuity. It helps your care budget grow and offers tax benefits. However, rising interest rates and limited offerings mean these products may not be widely accessible right now.

4. Self-Funding with Personal Savings

Using your own savings offers control but comes with risk. Do you have enough set aside to cover potentially years of care? Will using those funds compromise your other financial goals or your family’s future? This approach requires careful retirement planning and tax awareness—especially when drawing from IRAs or 401(k)s.

Key Considerations When Buying Coverage

If you decide insurance is right for you, here’s what to think about:

●      Timing: Most people buy in their 50s, when premiums are more affordable and they're more likely to qualify. Waiting increases both cost and the risk of being denied coverage.

●      Benefit Triggers: Policies usually start when you cannot do at least two Activities of Daily Living (ADLs). These include tasks like eating or bathing. There is also a waiting period before benefits begin.

●      Coverage Amount: Choose a daily or monthly benefit amount and decide how long the policy should pay. Think in terms of a "pool" of money you can draw from as needed, but make sure the premium fits your budget.

●      Inflation Protection: As care costs rise, consider a policy that includes inflation protection to ensure your benefits keep pace.

●      Company Strength: Choose a reputable insurer with a solid financial history—you’re counting on them to be there when you need them most.

Tailor the Plan to Your Life

Everyone’s situation is different. Singles may need more support because they do not have a partner to help them. Couples should think about how long-term care for one spouse will affect their shared finances.

Family health history is important too. Conditions like Alzheimer’s or diabetes can raise the chances of needing care.

Bottom Line

Ultimately, long-term care planning is about more than dollars and cents. It's about preserving dignity, protecting loved ones from undue hardship, and gaining peace of mind. The right strategy can help ensure that your later years are defined by comfort, not crisis.

Sources:

https://www.fidelity.com/viewpoints/personal-finance/long-term-care-costs-options

Disclosures:

This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.

This material is provided as a courtesy and for educational purposes only.

These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.