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Paying for Long-Term Care

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The US Department of Health and Human Services cites that almost seventy percent of retirees in America will need some long-term care.  The median annual costs for these services ranges from $53,768 to $105,850 in 2020. The Department also reports that those who receive Medicaid-financed nursing home care spend more time in residence than those who self-finance their care or have private long-term care insurance. These long-term care services and supports are becoming more critical as retirees live longer lives and worry about outspending their assets.

The Dilemma of Affording for Long-term Care

Paying for long-term care planning remains a significant challenge for most older Americans.  Long Term Care insurance may cover a portion of services or all of the costs of care.  Premiums depend on a person’s age, gender, health, location, and other criteria. The American Association of Long-Term Care Insurance lists 2021 average premiums for initial benefits of $165,000 (with a 1 to 5 percent annual growth rate) for a healthy fifty-five-year-old male to be between $1,375 to $3,685 per year. For the same coverage type, a healthy fifty-five-year-old woman can expect to pay between $2,150 to $6,400. Premium hikes tend to be costly because metrics used years ago in the insurance industry were faulty and did not accurately project the true costs.

What is Hybrid Long-term Care Coverage?

A different payment option is hybrid long-term care coverage. These policies are part annuity or life insurance and part long-term care coverage. You may purchase a policy upfront eliminating any future risk of premium increases, and your heirs may receive a death benefit if you do not need long-term care. This option is an arbitrage approach hoping that you will not require Long Term Care Services and that your heirs may benefit. Hybrid policy price comparisons are more difficult to ascertain than a standalone long-term care coverage policy.

How to Utilize a Health Savings Account to Pay for Long-term Care

A third option is for those retirees with sizable health savings accounts to use pre-tax funds to cover long-term care expenses or premiums. Currently, those itemizing deductions can write off long-term care expenses above 7.5 percent of their adjusted gross income on their taxes.

Finally, individuals with assets below a certain threshold may qualify for Medicaid.  Fortunately, Medicaid regulations permit various proactive planning techniques that can protect assets from the high costs of long-term care.

Call (570) 784-4654 to schedule an appointment with one of our Certified Medicaid Planners to discuss which planning technique is best for you.

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