By Mike Gibbons, RICP®
In planning for retirement, you have to ensure your nest egg can help you replace your paycheck. However, you also likely face higher healthcare costs as you age. And many of us will need some type of long-term care as we age, especially as many of us live into our 80s, 90s, and beyond. (1) Long-term care, which can range from using the services of a home health aide to living in a nursing home, can be very expensive, and usually isn’t covered by Medicare.
Many of us have experienced these high costs in helping our elderly parents.
You may be considering long-term (LTC) care insurance to help defray those future costs for yourself. Learn how an increasingly popular option, hybrid long-term care insurance, can help you secure coverage while letting you retain more of your assets.
Differences Between Traditional And Hybrid LTC Insurance
Traditional long-term care insurance provides coverage for the costs of chronic health conditions, such as Alzheimer’s disease. Generally, you should obtain long-term care insurance before you need the types of services it covers, which means many people start paying for this coverage in their 50s or 60s.
The appeal of traditional long-term care insurance has fallen in recent years as many policyholders have faced steep premium increases, forcing some to cancel their policies. Many insurance providers have exited this market. Also, if you ultimately don’t need long-term care before you pass away, you likely paid thousands in premiums that could have improved the quality of your retirement or been passed down to your loved ones.
Hybrid long-term care insurance, by contrast, is a combination of life insurance or an annuity with LTC insurance. Often, your premium payment is guaranteed not to change after you buy the insurance. If you don’t use the funds to pay for long-term care, they will pass to your heirs, similar to a life insurance policy.
By offering an option that’s less expensive than traditional long-term care insurance, hybrid long-term care insurance can free more of your retirement savings to enjoy today, to invest to grow throughout your retirement, or to leave behind to loved ones.
Purchasing Hybrid LTC Insurance
There are a number of firms that offer hybrid long-term care insurance, so be sure to shop around before purchasing a policy. As when choosing any other type of insurance, check the financial strength of the insurance provider as well as cost and the features they offer. An experienced financial advisor can help you sort through your options and help you find the insurance that fits your needs.
There are several downsides to hybrid long-term care insurance you should keep in mind. Purchasing hybrid long-term care insurance usually requires investing a large lump sum all at once or splitting it up over several years. That can put the coverage out of reach for many people who don’t have large sums of money to access all at once. Also, the coverage period for long-term care insurance may be shorter than traditional long-term care insurance, though some providers do offer lifetime coverage. And remember that if you do access the insurance for long-term care, you may have little left in insurance money to leave to your heirs when you do pass away, unlike with a regular life insurance policy
Planning For Retirement Healthcare Expenses
No one wants to think about needing long-term care, but failing to plan can cost you thousands of dollars in retirement, and possibly create a burden for family members. But you don’t have to go it alone. We at Gibbons Financial Group can help you explore your options for retirement healthcare expenses as part of your overall financial plan. If you need a retirement plan, I can help. Call 224-419-5550 or email me at Mike@gibbonsfinancialgroup.com to schedule a complimentary consultation.
About Mike
Michael J. Gibbons is founder and president of Gibbons Financial Group, an independent advisory firm providing custom-tailored financial planning and investment management services to pharmaceutical and healthcare professionals and their families. Mike has over 25 years of experience and spends a significant portion of his day working with pre-retirees and retirees, focusing on asset management, Social Security and pension planning, as well as retirement income preparation. Under the RIA, Mike helps manage approximately $150 million in assets under management and works with clients that meet a minimum investment criterion.
Mike has degrees in both business and psychology from Lake Forest College and currently holds his Retirement Income Certified Professional (RICP®) designation from the American College. Mike was named a Five Star Wealth Manager for 2015-2019* Mike is heavily involved in his community, having served on the Village of Gurnee Police Pension Board as a Community Volunteer and the St. Patrick’s Parish Financial Board. When he’s not working or volunteering, Mike loves playing golf and spending his time with his wife and children. To learn more about Mike and how he can help you, connect with him on LinkedIn, visit his website, and register for his free webinar, Retiring Early From Pharma, created specifically for professionals retiring from the pharmaceutical, biotechnology, and healthcare industries.
*As reported by Financial Planning Magazine, June 1996-2015, based on total revenue. 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 2015 Five Star Wealth Managers.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
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(1) https://longtermcare.acl.gov/the-basics/who-needs-care.html