One important aspect of retirement planning includes understanding a new set of risks and rewards in retirement. The obvious reward is more time spent on the people and/or activities we may have put off during our hectic working years. Two of the primary risks in retirement are longevity (outliving your savings) and inflation (decreased purchasing power over time).
The good news is we are living longer, which also means we must be prepared financially to protect against outliving our savings. The bad news is we are seeing the costs of health care increasing at a faster rate than other common goods we purchase (annual inflation for medical costs has averaged 4% per year since 2000 vs. 2.5% for the Consumer Price Index).
|How Much Does It Cost
According to the U.S. Department of Health and Human Services, the average cost of a long-term care policy in 2007 was $2,207. Most experts agree to enroll between the ages of 40-60 to see the biggest savings. While those who enroll after the age of 60 will usually pay more, it may still be advantageous compared to the alternative of paying out-of-pocket.
Long-term care insurance products are continuing to evolve as insurance companies respond to consumer demand and increasing medical costs. Though Oklahoma is regulated by the Insurance Commission against unjustified increases, increasing prices are something you should be aware of and plan for when deciding if this insurance is right for you.
Recent studies estimate 70% of all Americans will need some type of long-term care in their lifetime for such conditions as stroke, elder frailty, Alzheimer’s, Parkinson’s, and other conditions that affect more than 50% of people over the age of 65.
The need for long-term care insurance seems pretty compelling. According to the National Advisory Center for Long Term Care Insurance, in 2000, 9 million Americans needed long-term care services at an average cost of $55,750 per year. The current average annual cost is about $75,000 per person. By 2030, they project the number of those needing this care will skyrocket to more than 23 million Americans with projected annual costs of about $300,000 per person.
What is Long-Term Care Insurance?
Most long-term care starts at home with the help of family or friends until the care giving becomes too difficult. The next step might be to hire a paid caregiver to help with care duties in the home or move to an assisted living facility. Unfortunately, many people simply cannot afford such a luxury.
Long-term care insurance covers the costs of long-term care services which are not covered by traditional health insurance. Unfortunately, Medicare will only pay for a very short time of care and only under specific, limited circumstances, usually in a nursing home, leaving the rest to you.
The value of long-term care insurance is it covers in-home assistance with activities of daily living as well as care in a variety of facility and community settings, giving you choices and protecting loved ones from the burdens of care giving.
Long-Term Care Essentials
Here are some important things to consider when looking into Long-Term Care (LTC) Insurance.
Do You Have Assets to Protect?
Can You Afford it Tomorrow?
This article was first published in the Summer 2011 edition of the Retiring Right newsletter. Click here to view other newsletters. Not receiving your newsletter, update your address by completing the Change of Address form.