By Mike Gibbons, RICP®
Aging is a natural part of life, yet it comes with a slew of new challenges to overcome. Most common is the toll that age takes on your physical body and your susceptibility to physical wounding or disease. These are unfortunate circumstances to have to consider when you are living in what are supposed to be your “golden years.”
However, as the natural march of life progresses, there are solutions you can implement to maintain your quality of life while respecting your loved ones. This is where having a long-term healthcare plan comes in. True long-term planning is designed to keep you comfortable while giving you peace for the future.
Sadly, many adults have not considered the development of this plan a necessity and have paid for it down the road. You don’t want to wait until you need long-term care to start thinking about it. Recent research shows that 70% of people will need these types of services at some point in their lives. The need for these services can be sudden, and the associated costs can be high. But there’s no need to let these circumstances sidetrack your dreams; we firmly believe that planning for long-term care expenses is a key part of your retirement plan.
Let’s discuss what exactly qualifies as long-term care, mistakes we often see people make, and some considerations to implement coverage should you need assistance later in life.
What Is Long-Term Care?
Long-term care refers to helping people perform activities of daily living (ADLs). There are six ADLs, and to qualify for long-term care, you need to be unable to complete at least two of them without assistance.
These activities include bathing, eating, dressing, using the bathroom, transferring from one place to another (like a couch to a bed), and continence. If you aren’t able to do these on your own, you’ll need assistance. The question then becomes: How do I plan for this type of scenario? Do I pay for it out of pocket, purchase an insurance policy, or find some other alternative?
Before we get there, let’s discuss what not to do.
3 Long-Term Care Mistakes
The biggest mistake you can make is not being prepared, especially as it relates to how much long-term care could cost. Since the types of ailments any of us may have in the future vary greatly, the cost associated with that care will also vary. For example, if you are able to live in your home but still need assistance with some ADLs, you could hire a home health aide to come assist you. In Illinois, the median monthly cost for this service is around $5,664.
However, if the type of care you need is more extensive and you need a private room in a nursing home facility, it would cost $7,592 per month. If you were to spend a year in the nursing home, it would cost a whopping $91,095—and some people spend multiple years in these types of facilities.
While we don’t have a crystal ball and cannot predict your future health, we do know that people who are aware of these potential future costs are better able to plan for these expenses, which helps them meet their retirement goals regardless of whether they need this care or not.
Another mistake we see far too often is incorrectly planning for LTC. While it might be a nice idea to assume that your spouse or children will take care of you, it often doesn’t play out that way in reality. Your spouse will likely not be able to handle the physical demands of this care, and your kids will have their own lives and responsibilities to manage. Even if they want to, they won’t be able to give you the time and attention you will need at this stage of life.
Lastly, even if you do purchase a long-term care policy, you need to understand what your policy would cover and what it wouldn’t. You cannot simply assume that insurance will cover everything, because that may not be the case. While these policies can usually cover 100% of home healthcare expenses (as they are the most affordable), they may not be able to cover all expenses associated with assisted living and skilled nursing.
How to Cover Your Long-Term Care Needs
If you want to properly plan for your long-term care needs, I highly recommend you work with an independent financial advisor who can help you tailor a solution to your specific needs. There are a variety of options in the marketplace, and this isn’t a purchase that you should make without proper due diligence.
There are a few options we like to consider when evaluating policies. First, we think that a shared care rider on a traditional long-term care policy could be a great option. A shared care rider is for couples who own a policy together and allows them to share their maximum benefit amount. For instance, if a policy only allowed each spouse $250,000 of lifetime care, if one spouse hit that limit, then they would be left paying for everything above that amount out of pocket. With a shared care rider, once that spouse exceeded $250,000, they could then tap into their spouse’s lifetime benefit, allowing the couple to continue to benefit from their insurance policy. To lower your risk in the event of significant long-term care costs, consider this route.
Another option is a hybrid long-term care policy. Instead of owning a traditional long-term care policy (which only provides you a benefit if you need long-term care assistance), a hybrid policy can offer more flexibility. These types of policies combine long-term care benefits with life insurance benefits. If you end up needing long-term care help, these policies can be used for those purposes; but if you don’t need the help, they will provide a death benefit to your beneficiaries at your passing. For people who aren’t sure they’ll need to use their policy and are worried about not getting a benefit from it, this might be the solution.
Let’s Put Your Plan in Place
Though you may be years off from needing this type of care, wisdom would say that taking the time now to create a solid plan can offer peace for your future and for the impact you might have on your loved ones. Wise decisions like this now could help you step into the retirement season of life early—with all the benefits it brings.
At Gibbons Financial Group, our real-world approach to planning can help you confidently pursue the future you have envisioned. Call 224-419-5550 or email me at Mike@gibbonsfinancialgroup.com to schedule a complimentary consultation. And be sure to join our free webinar, Retiring Early From Pharma.
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.
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 2016 and 2018* 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.
*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 2016/2018 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.