LTC AWARENESS MONTH! (What is LTC?)
Glad you asked!
LTC stands for Long-Term Care and it can have two main meanings.
Heathcare.gov defines it as:
Services that include medical and non-medical care provided to people who are unable to perform basic activities of daily living such as dressing or bathing. Long-term supports and services can be provided at home, in the community, in assisted living or in nursing homes. Individuals may need long-term supports and services at any age. Medicare and most health insurance plans don’t pay for long-term care.
Because of that last sentence that this type of service is not covered by most any plans, including government support, there is LTC insurance plans that are provided by a fewer and fewer insurance carriers.
This is a combination “pickle” for us as individuals because the cost of being in an LTC situation is skyrocketing while the number of sources to offset that cost is dwindling.
So what is LTC policy? How does it work? Why is it critical (or as I have said elsewhere - the greatest asset you don’t have).
Think of it like that Aflac duck - it is insurance that stands in the gap that other benefits do not cover. In this case, if you need what is called long-term services and support (LTSS). Said another way, senior care for your daily needs, like a skilled nursing facility or home health care. A growing segment of LTSS is in the area of cognitive decline with the rise of Alzheimer’s, Dementia and other mental impairments.
These policies generally work in a variety of ways and come in a variety of forms. There are stand alone policies, co-pay versions or hybrid life insurance/LTC. When you are unable to perform a couple of the “activities of daily living” (eating, bathing, moving, going to the bathroom, etc.) and are in need of care, these pay for some or all, depending on the policy, of skilled nurses, home care, equipment or nursing homes and skilled nursing facilities.
LTC is becoming the most important thing to consider from a financial perspective for planning for your senior years. I believe it is more critical than planning for your retirement income and here’s why. Today’s cost run close to or over $100,000 a year for this type of care. and increasing The average length of care is 3-5 years and increasing. The likelihood of a person age 65 needing this type of care is 70% and increasing. Built well, these can provide more money for this specific job better than another option and they can have positive tax implications.
For many, a $500,000 expense like this would be financially burdensome to say the least. These situations often extend the financial burden to family as well as physical, emotional and social tolls that compound the challenge.
Choosing to allocate funds towards LTC coverage is not sexy. On the podcast we have called it “The Chard” of financial tools. Investments are sexy. The market is fun. But these are only sexy and fun until you come to time of needing to use them for LTC and hoping they do enough.
Long-Term Care coverage comes in a variety of shapes and sizes and we are here to help figure out which route will make sense for you. Also, this is not just for older people approaching “retirement age.” No, if you are 30 there is likely a plan that can be designed for you and strongly considered for your financial tool box along side other financial tools you are using.
As always, if you come across a financially related article you’d like to send my way please do!
Best place to send them is to me.
More next time!
Jonathan