Health care costs are a big concern for people going into
retirement, but the costs of long-term care can still be a shock.
Here are a few facts:
• 70% of people over 65 will need some form of long-term
care at some point.
• For married couples, the chance that one spouse will
need long-term care rises to 91%, says Byron Udell, CEO and founder of
AccuQuote.com.
• People living alone are more likely to need some sort
of home health care.
• Women outlive men, and thus, are more likely to live
alone and need some sort of home health care.
While some financial planners previously were on the
fence about long-term care insurance, they were still encouraging people to at
least have a plan for long-term care.
The Employee Benefit Research Institute says the average retirement
shortfall for Baby Boomers and Gen Xers is nearly $50,000. But that rises
dramatically when expenses for home health care or nursing homes are added: for
married households by $25,317; single males, an average increase of $32,433;
and by $46,425 for single females.
No wonder so many people are worried that they won't have
enough money to even cover health care costs in retirement, let alone make it
through retirement in the lifestyle they are accustomed to.
Let's start with the basics. Long-term care is the service,
both medical and non-medical, for people with a prolonged physical illness,
chronic disease or disability. That care can be administered in-home, or in an
institution like a nursing home or an assisted living facility.
Genworth Life Insurance Co., a leading provider of
long-term-care insurance, says the average length of a long-term care insurance
claim is 2.9 years based on reimbursement claims data from December 1974
through December 2013.
That said, the question is: Is long-term care insurance the
answer? Financial advisers used to be mixed on the option. But they seem to be
increasingly supportive of including the insurance as part of their financial
plans. They say long-term-care insurance is not for everyone.
John Sweeney, vice president at Fidelity Investments, says
provisions for health care are essential in retirement plans Fidelity creates
with its clients. Sweeney says in a recent survey of children of retirees, 45%
of the children expect to take care of their parents so if you don't have
children, a long-term care plan might make sense.
NEW OPTIONS
Several things were working against the broad appeal of
long-term-care insurance over the years. One is the expense. Also, the industry
saw some dramatic rate increases in the past several years. And several
providers got out of the business entirely. But the issue for many potential
customers was that you could pay the premium for years, and never need it.
Steve Cain, principal and national sales leader of NFP Long
Term Care in Los Angeles says the average annual premium for a traditional long
term care policy is $2,332. But a growing trend is the single premium life
insurance policy with a long-term-care rider.
Another benefit to this type of policy is the premiums can
be guaranteed. Straight long-term care premiums don't offer a guarantee against
premium hikes.
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