Make Smart Long-Term Care Financial Decisions
Given there is a seventy percent chance that care will be required, a wise decision would be to give some consideration to long-term care planning as a part of the life planning process. An important part of that process would address ways to pay for a potential need for care. When we look down the road ten, twenty or thirty years and think about the care experience we would like to ideally create for ourselves, we must anticipate that costs will jump significantly. Assuming a five percent average increase in extended healthcare costs per year, the matrix below shows an estimate what we can expect charges to be, whether care is receive in a facility or at home.
Projected annual costs for room and board
|
$30,000
|
$48,867
|
$79,599
|
$129,659
|
|
$50,000
|
$81,445
|
$132,665
|
$216,098
|
|
$60,000
|
$97,733
|
$159,196
|
$259,315
|
|
$70,000
|
$114,023
|
$185,731
|
$302,536
|
Perhaps inflation will be less than five percent; however, whatever percentage is assumed for the rise in costs of room and board, it will be more expensive, probably much more, to receive care sometime in the future. Not planning for the need for care, and leaving it as an unfunded potential expense, is simply not taking ownership of a responsibility and passing it on to loved ones.
There is a value proposition to manage the risk of long-term care without any out-of-pocket expense.
Two ways to manage the financial risk of long-term care are:
1. Purchase a traditional long-term care insurance policy and pay premiums each year.
2. Self-insure with an asset-based product which leverages your own assets to pay for long-term care if care ever needed.
The combo universal life/long-term care policy offer tax advantages and ways to pay for long-term care expenses. In this strategy, money is placed into a contract and it accumulates a cash value. The owner of the policy maintains control of the money, and has access to all or part of it, depending upon the contract, at any time. However, if the money stays in the contract, then there are funds to pay for long-term care expenses, greater than the original sum of money placed in the contract. If long term care is not needed, the money is there for the heirs, and if it is a universal life policy, tax-free and probate free.