Dollars & Sense
The long of it … It is obvious to all of us that people are living longer. In fact, the mortality tables for life insurance have recently been raised from 80 to 120 years. While it is a good thing that we’re living longer, it does create a greater need for care during these bonus years. And that care is either going to come from relatives or a professional caregiver.
Most of us don’t want to be a burden on our families, and in some cases we don’t have families who could or would take on that responsibility. However, it is estimated that 70 percent of folks 65 and older will need care. But the more surprising statistic may be that 40 percent will need care prior to that. Fortunately there are a number of options, including longterm care insurance policies, riders on other life products or annuities and even accelerated death benefits on whole life policies, which can help.
But first, just to give you some idea of the cost you could incur, there was a recent study released by John Hancock that stated the average private nursing home expense as $258 a day, which was $94,170 annually, and that it is expected to increase 3.4 percent a year. The average cost of in-home care was $29,640.
But don’t let those numbers lead you in to total despair! If you haven’t provided for long-term care expenses, just know that the best time to do something about it is sooner than later, and there are a number of ways to go about getting the help you need.
Are You in Good Health? There are long-term care insurance policies available, but you need to be in good health and have a good health history in order to qualify. And, the best time to get a policy is always before you need it. The ages of 55 to 60 are normally recommended as the optimal time, but individuals well into their 70s may even be able to qualify too. The premiums in those cases of course are much higher, but even with high premiums it can be a fraction of the annual out-of-pocket cost of a nursing facility.
Also, depending on your health, you may be able to qualify for whole life insurance that provides a rider for chronic or longterm care at home or in a facility. In addition, there are policies that allow you to access a significant portion of the death benefit, which are called accelerated death benefit endorsements, which apply to critical, chronic or terminal illness.
But, What If You’re Not in Good Health? There are still alternatives, which can assist if you are not in good health or have had a serious illness in the past. Fixed annuities with lifetime riders can provide an income-doubling feature, which does just that. It doubles the income you are receiving monthly from the annuity for three to five years depending on the policy.
The good news about the insurance chronic-care riders and the annuity income doubling feature is that these only require a letter from your doctor stating that you cannot do two of the six of your daily activities such as bathing, dressing, toileting, feeding yourself, transferring from a bed to a chair or continence. In some cases you can also receive care from a family member at home if you prefer and still collect on the policy.
And What About Medicare? Medicare and other health insurance only cover short-term recuperation or rehabilitation from recoverable events. Medicaid will cover the cost of care in a facility of their choice if you have no assets. If there is a spouse still living at home, some assets and income may be protected to provide for them as well.
The short of it … If you haven’t prepared to cover the cost of care for yourself or for your loved ones in these latter years you may only have a small window of time to do something about it. You can even gift it to someone who may not have coverage. In 2014 the IRS allows up to $14,000 to be gifted and there is no limit to the amount given over time. The most important thing to do is to know your options and make a decision.
Some things about getting older are just not fun, but when we take care of our finances, life is a lot better for us and for our familiesn.
Marsha McDonald is a financial advisor with Advantage Retirement Group with offices in Fort Myers and Naples. For more information visit advantageretirementgroup.com or call 239-561-1155.