Over the last few decades life expectancies have increased, giving many Americans a retirement that can last 30 years or more.1 Increasing longevity has resulted in longer, more fulfilling retirements, but has also led to more complications from unexpected health costs that can derail even the most well thought out plans. Developing a plan to address this risk can be an important part of your overall financial strategy.
Long-term care can be as simple as assistance with a range of daily living tasks such as walking, eating and bathing. In other instances, long-term care may mean sustained treatment for cognitive conditions, like Alzheimer’s. While a short term need for help or a limited visit to a rehabilitation facility will generally be covered by Medicare or traditional health insurance policies, a long-term care event is usually not covered and can have significant impact on your family. Therefore it’s important to think about the many questions that will have to be answered before you face a long-term care need: Who will be your primary caregiver? Where do you want to receive care? And how will your health and care needs impact your family and your finances?
And the biggest surprise of caregiving can actually be how much care and care-related expenses cost. The average annual cost for a nursing home stay is $108,405 (as high as $378,140 in some states) and the average cost for a home health aide is $61,776 a year for 40 hours a week.5
Just like any other risk, it’s important to think about your options for covering long-term care expenses and develop a plan. There are two approaches to consider. First, you can self-insure by managing the risk inside your portfolio. To be successful in this approach, you should establish a clear goal for how much you will need to set aside to cover long-term care expenses and invest that money more conservatively in order to ensure it is available when you need it. Your investments will be subject to market risk and you run the risk of expenses outpacing the amount you set aside.
The second approach is to transfer the risk to an insurance company through the purchase of a long-term care insurance product. Long-term care insurance can help you protect your wealth while also reducing the potential burden you place on your family. When structured properly, long-term care insurance can help ensure that you’ll have access to high-quality care should you ever need it, without having to spend your life’s savings to pay for it.
When considering long-term care insurance, it is important to understand the breadth of options you have available to fit your individual needs and preferences. The following types of long-term care coverage are available through Merrill:
You’ve worked hard to build your wealth for a more secure future. As you approach retirement, protecting that wealth becomes even more important than building it. A financial strategy that addresses healthcare costs — both those you expect and those that are less predictable, such as the need for long-term care — may help protect your assets, reduce the burden on your family should you need care and enable you to leave a more meaningful legacy for your heirs.
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2 National Clearinghouse for Long-Term Care Information, U.S. Department of Health and Human Services, “How Much Care Will You Need?” Accessed 3/29/22. https://acl.gov/ltc/basic-needs/how-much-care-will-you-need.
3 90% of those who receive long-term care assistance live at home or in a community setting. Source: Edem Hado and Harriet Komisar, "Long-Term Services and Supports." AARP Public Policy Institute, August 2019
4 61% of caregivers are women. The number of Americans providing unpaid care has increased over the last five years from 18% in 2015 to 21% in 2020. Source: Caregiving in the U.S. 2020, National Alliance for Caregiving and AARP, Washington D.C .
5 Genworth 2021 Cost of Care Survey: Home Care Providers, Adult Day Health Care Facilities, Assisted Living Facilities and Nursing Homes. Accessed 3/29/22. https://www.genworth.com/aging-and-you/finances/cost-of-care.html
7 Traditional long-term care insurance is a policy dedicated to long-term care needs and offers the most comprehensive coverage; but is available only from a small number of insurance companies and is not currently offered through Merrill.
This material should be regarded as general or educational information on Healthcare/Medicare considerations and is not intended to provide specific healthcare/Medicare advice. If you have questions regarding your particular situation, please contact your legal or tax advisor.
Long-term-care insurance coverage contains benefits, exclusions, limitations, eligibility requirements and specific terms and conditions under which the insurance coverage may be continued in force or discontinued. Not all insurance policies and types of coverage may be available in your state.
All guarantees and benefits of the insurance policy are backed by the claims-paying ability of the issuing insurance company. They are not obligations of, nor backed by, Merrill or its affiliates, nor do Merrill or its affiliates make any representations or guarantees regarding the claims-paying ability of the issuing insurance company
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