If you're one of the 78 million baby boomers retiring in the next few years, then you've probably already made plans for your future. You made sure your estate is in order, your savings are organized, and your will is in place. But, have you considered what you will do in the event of diminished mental or physical capacity?
With an average life expectancy in the mid-70s, we need to plan our future for more than just accidents and illnesses -- we need to plan for the style and way of life we have been accustomed to and to make certain it does not wane due to unforeseen incidences. But more importantly, we need to preserve our independence and dignity, especially in old age.
As a citizen of the United States, you receive Medicare after reaching 65 years of age, or if you are disabled. But, as many seniors are discovering too late, usually Medicare and Medicaid, a program for those financially impoverished, are not enough to pay for the increasing amount of physician visits, prescription drugs, medical devices, and assistance with daily living that occurs as you increase in age.
According to a research conducted by AARP in March 1999, "[t]he average length of residency in an assisted living facility in 1997 was approximately 26 months; the most common reason for discharge was the need for a nursing home stay." With assisted living estimated at nearly $3000 a month and Medicare and Medicaid providing only nine percent and 52 percent, respectively, of the costs, the gap must be provided by the resident or their family members. And estimates rise dramatically for nursing home care.
Though many seniors live independently, many are requiring help with walking, shopping, driving, or even bathing. Some are unable to take care of themselves due to long term disabilities or illnesses, such as Alzheimer's or permanent kidney failure, that impair their mental capacity or physical movement. As a result, long-term care insurance is becoming more of a reality for families as they plan for their future.
Long-term care insurance for assisted living allows you to live in a private or semi-private room in a facility that is supervised around the clock with social activities, personal care services, and assistance as needed. Not to mention that assisted living allows you to live in a setting as close to a homelike environment as possible, stressing independence and respect of the residents. And, should you need nursing home care, long-term care insurance can cover that as well. long-term care insurance allows you to live your life in the manner in which you are accustomed, with dignity and independence, and it's never too late to consider insurance, regardless of whether you are 40-years-old or 70.
You may want to answer these questions instead: Is your independence and dignity important to you? Is privacy important to you? Do you want to lessen the financial burden on yourself and your family as you become older? Do you want to pass your savings and estate onto your family members or friends, rather than spending it on assistance with daily living?
If you answered yes to any of these questions, you should consider long-term care insurance. The amount you can expect to pay out-of-pocket for assisted living or nursing home care ranges anywhere from $800 to $5000 a month, and if you're like most Americans this probably exceeds your monthly retirement income. For some Americans, those savings can be better spent elsewhere, such as gifts to your family members, gifts to charity, or even gifts to your alma mater, especially when there is an alternative to paying for long-term care on your own.
According to industry expert, Derek Rogers, retirement planner for Riverpointe Financial, a brokerage firm for long-term care insurance providers, the best time to purchase long-term care insurance is in your 50s when retirement is imminent and the possibilities of needing assistance becomes greater. It's also cheapest to purchase insurance in your 50s as the premiums jump significantly as you get closer to your 70s and 80s, when care is inevitable.
Because the amount for assisted living and nursing home care averages about $200 a day, Rogers recommends purchasing a plan that provides about $180 to $200 a day if you're in your 40s which makes your annual payments only about $200 to $250. Because the cost of living in your state determines the amount of coverage you'll need in the future, the best way to determine the amount of coverage you'll need is to calculate your state's average daily cost for nursing home care. In states such as Florida the cost averages about $120 a day, so keep this in mind when purchasing long-term care insurance.
Rogers also recommends purchasing a policy with lifetime benefits or a minimum of benefits for five years, and work down according to how much you can afford, as well as covering 100 percent of home health care with a 90-day elimination period, also known as the deductible period. The elimination period is the number of days you pay for services before your coverage becomes active. The average is between 20 and 100 days, and since your premiums increase as the deductible period decreases, you should consider what you need and what you can afford before choosing the elimination period.
The cost for long-term care increases every year and you must take this into consideration when purchasing a policy. A policy that provided $150 a day today would cover most of your expenses, however, it's likely this amount would barely cover your expenses in 20 years.
You can purchase policies that allow an inflation adjustment that increases the amount of benefits paid yearly by a certain percentage, normally five percent, which is compounded yearly, or once from the original benefit. You can even limit the length of time that the benefits would inflate if you foresee needing it for a certain amount of time. Rogers recommends that if you are under the age of 75, choose one that compounds yearly. If you are 75 or over, he recommends you choose a single rate of inflation.
Long-term care insurance covers all your needs from room and meals to assistance with daily living and housekeeping. As you progress in years, your needs will change. You may only require assistance with shopping or cooking when you're 75-years-old, but you may need assistance with all your daily activities when you're 85. Of course, the benefits depend on the level of coverage you purchase so plan for any incidentals by purchasing a comprehensive policy that allows you some flexibility.
Usually, long-term care insurance does not cover the following items, but for a more comprehensive list please contact your financial advisor or insurance agent:
For more information about long-term care insurance, contact your state's Insurance Commission under the Government listings in the telephone book, or contact Derek Rogers at Riverpointe Financial, e-mail: firstname.lastname@example.org or call (904) 281-9220. Courtesy of ARA Content, www.ARAcontent.com, e-mail: info@ARAcontent.com
EDITOR'S NOTE: Established in 1985, Riverpointe Financial is a full-service financial planning and investment firm also offering brokerage service for long-term care insurance providers. Riverpointe Financial is a branch office for Walnut Street Securities, the second largest investment house in the nation.