December 21, 2019
Even the best retirement plans can be overturned by unexpected out of pocket costs during our golden years. Two of the biggest problems that can arise are an unplanned long term care need of the retiree, and providing for the unplanned care needs of a loved one. Recent studies shine some light on these challenging areas, and the results are startling.
Long Term Care
According to US Department of Health and Human Services, people ages 65 and older have a 70% chance of needing long term care, and about 20% will need long term care for five or more years. There are some assistance programs in place, but they are limited and can be difficult to qualify for. For instance, Medicare will pay for long term care services but it only covers a few months of care, and Medicaid can help longer term but the individual must meet stringent income and asset eligibility requirements.
The 2019 Genworth Cost of Care Survey shows the stark reality of the cost of long term care. The survey found that in 2018 the average annual cost of home healthcare was $52,624 per year, assisted living facilities cost $48,612 per year, and a private duty nursing home was a whopping $102,200 per year.
And even if you are not a part of the 70% of retirement aged-individuals who will need long term care, the cost of caring for a loved one in need of care can also waylay careful retirement planning. The AARP report Family Caregiving and Out-of-Pocket Costs found that over half of those surveyed had to take leave from their work, or modify or reduce their scheduled hours in order to provide care for their loved one. The survey further shows that 3 in 10 tapped personal savings, 1 in 6 reallocated savings set aside for retirement, and more than 1 in 10 made withdrawals from a retirement account. Family caregivers can expect to spend 20% of their personal income on caregiving costs and activities.
These surprise costs during retirement are exceptionally difficult to plan for. It helps to have a long term care insurance policy. But if you don’t have one already, and anticipate needing one, it is likely too late to take out a policy at that point as the policy would be prohibitively expensive if the policy is available at all. The good news is that for many people in need of long term care who have a life insurance policy, a life settlement can provide tremendous assistance through the sale of the policy to a third party.
A life settlement is the sale of a life insurance policy for less than the policy’s death benefit, but more than the cash value in the policy—if there is any. The seller of the policy is no longer responsible for premium payments on the policy, and the funds they receive in exchange for the policy can even be placed in a benefit account to help pay for long term care needs!