Planning for Long-Term Care: Key Considerations and Strategies 

As we age, the likelihood of needing dedicated medical care or assistance with daily living activities increases. In fact, the U.S. Department of Health and Human Services estimates that 70% of people turning age 65 will need some form of long-term care in their lifetimes. 

Unfortunately, traditional health insurance plans including Medicare typically offer limited coverage for long-term care, leaving many to cover these costs out of pocket. This can quickly drain savings and retirement funds, potentially jeopardizing your financial stability in later years. 

For those planning for retirement, incorporating long-term care into your overall financial plan isn’t just wise—it’s essential. By taking proactive steps to understand, plan for, and manage the costs associated with long-term care, you can safeguard your finances in your golden years, providing peace of mind for yourself and your loved ones.  

What Is Long-Term Care?

Long-term care refers to a variety of services designed to meet a person’s health or personal care needs during a short or long period of time. These services often help people live as independently and safely as possible when they can no longer perform everyday activities, such as bathing, dressing, and eating, on their own. 

Long-term care may also include specialized medical care from nurses or therapists for chronic illnesses or disabilities. These services can be provided in various settings, such as in the home, in community facilities, or in nursing homes.

Long-term care can be necessary for people of any age, although it’s more commonly associated with elderly individuals. The need for long-term care can arise suddenly, such as after a heart attack or stroke, or it can develop gradually, as aging or illness progresses and makes performing everyday tasks more difficult.

Why Planning for Long-Term Care Is Essential

Long-term care can be expensive, and these costs can deplete savings quickly. Since Medicare and standard health insurance plans often cover only a limited portion of long-term care costs, if any, proper planning is essential to avoid financial strain and instability.

Early planning allows ample time to explore insurance options, such as long-term care insurance, and other ways to finance care if the need arises. It also gives you the opportunity to research various care options, from in-home care services to assisted living and nursing homes, and determine which choice best fits your personal preferences and needs.

Indeed, facing a sudden need for long-term care without a plan can be stressful for both you and your loved ones. Planning ahead can help reduce anxiety and financial stress, providing peace of mind as you age.

Considerations and Strategies When Planning for Long-Term Care

Planning for long-term care helps ensure you have control over your care options and can maintain your financial security later in life. The following considerations and strategies can help you develop a long-term care plan that aligns with your personal values, healthcare needs, and financial means. 

1. Assess Your Risk

Considering your current health status and family medical history is a foundational step in assessing your potential need for long-term care. Some health conditions have genetic components that may increase your risk of developing certain diseases or disabilities requiring long-term care. 

For example, if there’s a history of chronic conditions like heart disease, diabetes, Alzheimer’s disease, or certain cancers in your family, you may be at a higher risk of facing similar health issues as you age. Genetic testing and discussions with your healthcare provider can offer insights into your personal risk factors and guide your long-term care planning.

In addition to genetic predispositions, your lifestyle choices play a significant role in shaping your future health needs. The decisions you make today about your diet, exercise routine, and other habits can either mitigate or exacerbate the impact of your genetic risks.

By addressing these lifestyle factors, you can not only improve your quality of life but also potentially reduce the need for long-term care in the future. Nevertheless, an honest assessment of your current health and the potential risk factors you face can help you determine your likelihood of needing care and craft your long-term care plan accordingly. 

2. Understand the Costs of Care

Understanding the costs associated with long-term care is crucial for effective financial planning. 

According to Genworth’s 2023 Cost of Care Survey, average annual costs can range from $75,504 for a home health aide to $116,800 for a private room in a nursing home facility. However, these costs can vary significantly based on the geographic location and the type of care you need.

It’s also important to consider the impact of inflation on long-term care costs. Since the cost of healthcare typically rises at a faster rate than general inflation, the amount you’ll need to budget for long-term care services will likely increase over time. 

By researching current costs and factoring in inflation, you can develop a more robust financial plan that better prepares you for the potential need for long-term care. This proactive approach can help mitigate financial stress later in life, increasing the likelihood that you and your loved ones can afford the necessary care without compromising other financial goals.

3. Explore Your Funding Options

Deciding between self-funding long-term care or purchasing a long-term care insurance policy is a significant decision that depends on your individual circumstances, financial situation, and personal preferences. 

If you have substantial financial resources, you may want to consider self-funding your potential long-term care needs. This option gives you the flexibility to choose the type and level of care you receive without the restrictions an insurance policy might impose. 

Self-funding can also help you avoid paying expensive monthly premiums for an insurance policy you may never need. However, since the cost of long-term care can be unpredictable and may rise significantly, it can be difficult to plan accurately without potentially running out of funds.

Due to the many uncertainties associated with long-term care, many people choose to purchase long-term care insurance, either as a standalone policy or as a rider on a life insurance policy. These policies can provide peace of mind but can also be expensive and tend to have strict eligibility requirements, especially as you age. 

4. Consider Long-Term Care Insurance

Long-term care (LTC) insurance is designed to cover the costs of services that traditional health insurance and Medicare typically don’t cover, including custodial care (assistance with activities of daily living) and skilled care (medical care and nursing services).

Many LTC insurance policies offer flexibility in terms of the types of care they cover and where you can receive care, allowing you to choose a policy that matches your needs and preferences. While a LTC policy can help protect your savings and assets from the high costs of long-term care, there are a few drawbacks to consider. 

For instance, premiums can be expensive, especially as you age or if you have pre-existing health conditions. In 2023, the average 55-year-old couple paid $2,080 per year for $165,000 of coverage, according to the American Association for Long-Term Care Insurance.

Moreover, not everyone is eligible for long-term care insurance. A variety of factors can disqualify you from attaining coverage, including: 

• Age
• Pre-existing health conditions
• Recent health events
• Cognitive impairments
• Functional limitations 
• Terminal illnesses.

A history of substance abuse or mental health disorders may also disqualify you, as can a criminal background. Since the percentage of applicants denied insurance tends to increase with age, it’s best to plan early, securing coverage while you’re still relatively young and healthy.  

Long-term care insurance can be complex and may not be right for everyone. Be sure to consult with an insurance specialist or fiduciary financial planner to determine if this option is right for you. 

TrueNorth Wealth is here to help.

Navigating the complexities of long-term care planning can be daunting without an experienced guide. If you’re looking for personalized guidance and strategies, TrueNorth Wealth is here to help. Our team of fiduciary CFP® professionals can help you develop a comprehensive plan that considers your potential future healthcare needs within the context of your broader financial goals. 

TrueNorth Wealth is among the top Wealth Management firms in Utah and Idaho, with offices in Salt Lake City, Logan, St. George, and Boise. At TrueNorth Wealth, we focus on helping our clients build long-term wealth while maximizing the enjoyment they receive from their money. We do this by pairing our clients with a dedicated CFP® professional backed by an incredible team.

For our team at TrueNorth, it’s about so much more than money. It’s about serving families all across Utah and helping them achieve freedom and flexibility in their lives. To learn more or schedule a no-cost consultation, visit our website at TrueNorth Wealth or call (801) 316-1875.