Medicare is invaluable for many seniors, but it provides little coverage when it comes to assisted living or nursing home care. The costs of long-term care are something that everyone should consider when they start getting older, so it is important to start looking at the ways in which you might be able to fund your care. Here are four popular solutions, each with their pros and cons.
Long-Term Care Insurance Policy
A long-term care insurance (LTCI) policy helps you fund long-term costs not covered by Medicaid, such as extended stays in a nursing home, home care, and assisted living. Some policies can even cover home modifications to help you age in place. This detailed guide to LTCI policies by AARP explains what they are and how they work.
Because an LTCI policy is simply a type of insurance, there are many options out there, each with different levels of coverage and varying prices. On average, LTCI for a couple aged 60 costs $3,381 per year, but this fluctuates quite a bit.
It is important to note that not everyone is likely to qualify for an LTCI. About 15 percent of people who apply fail due to pre-existing health conditions such as Alzheimer’s, dementia, Parkinson’s, and MS. Other disadvantages include long waiting periods, rising premiums, and restrictive policies. It may still be useful, but it should not be considered as the only option.
Health Savings Account
A health savings account is a great way to save up money for long-term care, allowing you to put aside tax-free dollars toward future healthcare costs. You don’t have to put in a certain amount of money, so you maintain control over your spending and how much you choose to save. This is its main advantage over an insurance policy, which involves premiums and a certain level of sunk costs.
This is also, however, one of its main disadvantages: since it’s up to you to put the money aside, you may still be caught out by unexpectedly high bills. There is also the matter of an HSA only being given to those with High Deductible Health Plans — this means you will still have to pay high deductibles, and it also means that you can’t open an HSA if you have Medicaid.
Of course, you could simply choose to set aside money in a personal savings account. This provides you with less protection than some of the above options but somewhat more freedom. It can be difficult to save up a lot of money very quickly, so using personal savings is mostly only an option if you are either well away from retirement or already have a large savings fund.
This is probably not an option for funding all of your long-term care costs, but you could also sell some of your existing assets to free up cash. Even if you don’t intend to do this, it can be worth determining the value of your current assets, including the value of your home.
If you are not committed to the idea of aging in place, you could take the money from the sale of your house to fund a nice, private assisted living facility or retirement community. With the average monthly price of an assisted living facility being $3,500, this could fund you for a few years, depending on the value of your house.
There is not a “correct” solution when it comes to funding long-term care. The best option for you will depend on a variety of factors, from your preference to the availability of care in your area, and your budget. If you need help deciding how to proceed, don’t hesitate to seek advice from a professional advisor who can point you in the right direction.