The demand for long term care is growing, and with increased demand comes higher costs.
A few years of nursing care, assisted living or a part-time home aide can significantly disrupt a client's portfolio — especially if they haven't planned far in advance.
Despite the risks, many retirees haven't planned at all, and just over 8 million Americans hold long-term care insurance policies.
Often, pervasive misconceptions can keep people from planning or seeking counsel on long term care funding. If you can clear up this confusion among your clients, you'll put them in a far better position to plan their investments, savings vehicles and drawdown strategies. You may even help them avoid a few rash decisions and costly mistakes.
1: "I'm never going to need it"
"Everyone admits they're not going to live forever, but planning for death is still easier than the conversation about planning for long-term care," says Jackie Clark, Long-Term Care Planning Specialist with Farmington River Financial Group. The need for care is touchy, and many clients won't start the conversation themselves.
With just over five percent of the 65 and older population occupying nursing homes, many clients may might assume that their own long term care is a relative improbability. Yet retiring boomers are living longer than any other generation, and there's a lot more to long term care than skilled nursing. From in-home care to assisted living, roughly 70 percent of people currently 65 and older will need some form of LTC. And someone who buys an LTC insurance policy at 60 has a 50 percent chance of using it before they die.
2: "Medicare will cover me"
"Because Medicare is so limited when it comes to long term care, people vastly underestimate the impact it will have on their retirement plan," says Clark.
Part B only covers up to 100 days of care in a skilled nursing facility, and only if that care was triggered by a hospital stay of three days or longer. Even then, only the first 20 days are covered in full, and the remainder costs patients $164.50 per day in co-insurance.
Medicaid, on the other hand, will cover long-term care, but only if a client has depleted their assets. Not all nursing homes, assisted living facilities and home care companies accept Medicaid, either; private pay often puts people at the front of the line. Given the low asset levels necessary to qualify for the government coverage in the first place, clients discharged from a facility are often left with little to live on.
3: "Long term care insurance is the best way to pay"
Monthly costs average $3,861 for home health aides, $3,628 for assisted living and $7,698 for private nursing home rooms. With costs that high, clients often assume long-term care insurance is the best funding vehicle (or that any planning is futile).
