Cents and Sensibility
Cents and Sensibility
Act now to defray
long-term care costsIf you're a baby boomer, then the biggest threat to your future financial security may not be the fluctuating stock market. It may be the high cost of long-term care. And if you don't plan for these services well before you need them, you could be jeopardizing your financial independence during your retirement years.
Consider these facts:
>> The average cost for a year's stay in a nursing home is $50,000.
>> Over the past several years, nursing home costs have been rising 5 percent or more per year.
>> One out of every three men who live beyond 65 will require nursing-home care, while one out of two women will need these services.
If you rack up hundreds of thousands of dollars in nursing home bills, all your financial plans during retirement may go up in smoke.
What can you do to prevent this from happening? First, you need to be familiar with the funding sources available for long-term care. Many people believe that some federally-sponsored program, such as Medicare or Medicaid, will pay for long-term care costs. But that's just not the case. Medicare only covers a small fraction of long-term care expenses, while Medicaid won't help at all, unless you're willing to "spend down" the vast majority of your financial assets.
In short, when it comes to paying for long-term care, you're going to have to take matters into your own hands. And that's why you should strongly consider purchasing long-term care insurance from a private insurer.
Not all long-term policies are the same, so shop around. Look for a company that has earned the highest safety rating from one of the major independent rating agencies. And look for a policy that, at the minimum, has these features:
>> Comprehensive coverage. Make sure your policy pays for care in a nursing home, assisted living facility or a private home.
>> Inflation protection. Nursing home costs are rising sharply. So you'll want a policy that increases its coverage to keep up with inflation.
>> Waiver of premium. If your policy has a "waiver of premium," you won't have to pay additional premiums once you start receiving benefits.
Here's one final suggestion: Don't wait too long. The younger you are when you get your policy, the lower your premiums will be. Long-term care premiums increase particularly sharply between the ages of 60 and 70.
Guy Steele is a financial planner and head
of the Pali Palms office of Edward Jones. Send
planning and investing questions to him at 970
N. Kalaheo Ave., Suite C-210, Kailua, HI, 96734,
or by email at: gsteele2@pixi.com