Retirement planning is more challenging than ever. For years, people were able to rely on the proverbial three-legged stool (pension, social security and private savings), to help assure a secure retirement. These days, that stool is more than a little wobbly and it is difficult to imagine that anything will change in the future.Few employers still offer the defined benefit pension that was a mainstay of retirement. In many cases, traditional pensions have been replaced by 401k plans, which were hit hard during the economic downturn. Social security is threatened by the ballooning deficit, with changes to the current structure all but certain. Even private savings, while on the rise, is sometimes not sufficient to cover the duration of retirement.
If you’re lucky enough to have a retirement nest egg, you want to do everything you can to safeguard it. One potential threat that you may want to consider is the need for long-term care. Often overlooked as part of retirement planning, long-term care is the kind of care you may need when you are no longer able to perform some of the basic activities of daily living, like bathing or dressing, without assistance. Since approximately 70% of people who reach age 65 will require some period of ongoing assistance or supervision, due to physical or cognitive impairment, it is important to understand the implications. (U.S. Department of Health and Human Services, National Clearinghouse for Long-Term Care Information, accessed September 25, 2009).
Don’t make the mistake of assuming that your medical insurance covers long-term care or that government programs will foot the bills. Medical insurance is intended to cover acute illness that you will recover from – not chronic, debilitating disorders that can lead to the need for long-term care. Medicare and Medicaid can offer some help, but only after stringent requirements are met. And like social security, both programs are under considerable strain because of limited resources. Relying on any of these options may result in your having to pay out-of-pocket for your own care.
For this reason, many financial planners are now recommending the purchase of long-term care (LTC) insurance as a way of helping to protect your assets. The coverage is designed to pay for care in a variety of settings, from your own home to a nursing home setting. The premiums for the coverage are far less than the amount you would have to pay for your care, should you ever need it. Since costs vary by state of residence and kind of care, you can determine coverage amounts by considering where you might expect to receive a particular kind of care in the future.
Many people start considering this insurance coverage in their late forties and early fifties. This is a good idea for a couple of reasons. First, you must be in good health to be accepted for coverage. If you wait to apply and your health changes you may not be able to purchase a policy. Second, long-term care premiums are based on your age when you buy the insurance, so the younger you are, the lower your premiums.