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    Insuring Your Quality of Life in Later Years

    By Brandon Miller, CFP–

    It’s hard to think about, but long-term care is an important need for which you should prepare. It’s also something most folks start planning, and saving for, later than they should. Why’s that? Well, insurability isn’t guaranteed. There are challenges of underwriting and there is a possibility of not being approved. The timing is critical so the sweet spot for securing a stand-alone policy is from ages 50–55.

    How much care might you need? On average, women will need 3.7 years of care, and men will need an average of 2.2 years.

    Approximately half of people turning age 65 will require some type of paid long-term care in their lifetimes, according to Morningstar. Only half huh, you ask? Why should I pay for a policy with 50–50 odds?

    While we don’t have a crystal ball, we can plan ahead for the financial aspect even if we don’t know what health challenges we may face down the road. Planning for yourself and for those responsible for your care and how to fund it will be appreciated by future-you.

    But, in some cases, it might not make sense to purchase a policy. If you are on the almost-Medicaid end of the spectrum, that might be your best option for care. If you are riding high on the hog, you can plan to “self-insure.” The rest of us, though, should consider some sort of policy.

    You can pay in advance too and keep retirement savings in place for your golden years. You may be paying more upfront but that way it is one and done. Otherwise, it’s a fixed cost so it needs to be factored into your overall budget.

    How much are we talking about? According to Genworth, in the Bay Area it’s about $7,000–8,000 a month for in-home care, $6,000–7,000 for an assisted living facility, and $12,000–16,000 for a nursing home.

    About 60% of us will need assistance with things like getting dressed, driving to appointments, or making meals, according to the Administration for Community Living (ACL), a division of the U.S. Department of Health and Human Services. Not all of these activities will require paid assistance.

    Some of us may require home care, which would include those who need minimal assistance with health-related tasks. Others might benefit from adult daycare, which offers daytime supervision, including meals and recreational and therapeutic activities. It occurs in a community setting.

    The ACL defines long-term care as “a range of services and supports you may need to meet your personal care needs. Most long-term care is not medical care, but rather assistance with the basic personal tasks of everyday life, sometimes called Activities of Daily Living (ADLs).”

    ADLs include:

    • shopping for groceries or clothes,
    • managing money,
    • housework
    • caring for pets,
    • bathing,
    • using the bathroom,
    • and taking medication.

    Six Steps to Long-Term Cre Planning

    Planning is critical, but many people are not sure what is covered by insurance, and others are often misinformed about what is covered by Medicare. Here are six steps to help you think—and begin planning for—your possible long-term care needs.

    1. Gauge the likelihood of needing care.
    2. Review potential costs.
    3. Assess available resources.
    4. Create a long-term care fund.
    5. If insurance is the answer, investigate whether a stand-alone or hybrid policy makes sense.
    6. If government-funded care is part of the solution, think through the ramifications.

    Medicare and most health insurance plans, including Medicare Supplement Insurance (a Medigap policy), do not pay for long-term care.

    What does Medicare cover?

    • Medicare covers up to 100 days of nursing home care. For many, that may not be enough.
    • Medicare can help with costs for skilled-home health or other skilled in-home services. What is skilled-home health? It is a wide range of healthcare services that can be provided in your home for an illness or injury. These might include monitoring a serious injury or illness, injections, patient and caregiver education, and nutrition therapy. The goal is to help you recover, regain independence, become more self-sufficient, or slow any decline in health.
    • Generally speaking, long-term care services by Medicare are provided for a short period of time.

    Medicare does not pay for non-skilled assistance with ADLs, which make up most long-term care services. If needed, you will have to pay for long-term care services that are not covered by a public or private insurance program.

    What about Medicaid?

    Medicaid is available to those who meet strict income and asset guidelines. Unlike Medicare, which is health insurance, Medicaid is public assistance.

    Medicaid will count wages, Social Security benefits, pension, veteran benefits, bank and investment accounts, trusts and annuities, and your property. In most states, Medicaid looks at your income over the last five years, according to the American Council on Aging. California reviews your data going back 30 months. Assets that were transferred or gifted during that period may count against you. So, we would advise that you not try to transfer financial assets to qualify for Medicaid.

    Medicaid eligibility occurs on a rolling basis. You could make just $1 over the monthly income limit and end up on the hook for the cost.

    Developing Financial Strategies

    Which option is best will depend on various factors, including age, health status, the likelihood of needing care, and your financial situation. Some people use their own assets to pay for care. Be advised you may have tax consequences for drawing on an IRA, 401k or qualified plan. Discuss this with your tax advisor.

    A reverse mortgage, long-term care insurance, hybrid life insurance policies, and annuities can provide much-needed flexibility.

    Let’s look at these potential resources.

    A reverse mortgage can be complicated, but it may offer you the cash needed to help with long-term care. Other borrowing options may be available, too, including a home equity loan.

    Long-term care insurance is an alternative. The cost will vary depending on the benefits. Younger, healthy people who are at low risk of needing long-term care in the next 25 years may benefit from a long-term care policy.

    Costs will rise for those who are older or have health problems. You may not qualify if your health is compromised or if you are already receiving end-of-life care services. Typically, you become eligible for benefits when you can no longer perform two ADLs. Most policies have a waiting period before you receive benefits. However, many insurance companies no longer offer traditional policies. Those that do may raise premiums annually, and the cost may be high.

    Hybrid life insurance offers unique features that may offer financial assistance. What is a hybrid policy? It combines life insurance with long-term care insurance. The policy may pay for long-term care or a death benefit if the policy isn’t used to pay for care.

    Another option is a long-term care annuity, which provides a benefit based on your investment. However, it has become challenging for insurers to provide these policies due to today’s interest-rate environment.

    Other Avenues

    Some states offer PACE (Program of All-Inclusive Care for the Elderly), which is a combined Medicare and Medicaid program. It may pay for some or all the long-term care needs of a person with Alzheimer’s disease.

    SHIP, the State Health Insurance Assistance Program, is a national program offered in each state that provides one-on-one counseling and assistance with Medicaid and Medicare.

    There’s a lot to sift through, so talk to a trusted insurance agent to look at what works best for you.

    Brio Financial Group is an SEC registered investment adviser. SEC registration does not constitute an endorsement of Brio Financial Group by the SEC nor does it indicate that Brio Financial Group has attained a particular level of skill or ability. This material prepared by Brio Financial Group is for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product. Opinions expressed by Brio Financial Group are based on economic or market conditions at the time this material was written. Facts presented have been obtained from sources believed to be reliable. Brio Financial Group, however, cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Brio Financial Group does not provide tax or legal advice, and nothing contained in these materials should be taken as tax or legal advice. Please consult with your tax professional regarding your particular situation before implementing any strategies discussed.

    Brandon Miller, CFP®, is a financial consultant at Brio Financial Group in San Francisco, specializing in helping LGBT individuals and families plan and achieve their financial goals. For more information:

    Money Matters
    Published on December 21, 2023