andrei murphy: how to plan for long-term healthcare costs
TRANSCRIPT
With increasing healthcare costs, itcan be difficult to plan for the
future. Senior couples are more andmore often finding themselves unableto financially cope with retirement
despite extensive planning. The risingcosts are impossible to predict. Illnessitself can range nearly anywhere incost, lasting for an undisclosed amountof time that is bound to make a dentin the bank account. With theseunknown variables, it only makes
sense that elderly couples are findingthemselves underprepared,
overwhelmed, and intimidated by anunknown future.
That’s why it’s so important, even if difficult, to try and plan for such health-careuncertainties. Although absolutely easier said than done, there are a few different forms
of insurance coverage that middle-age couples can begin to implement in order todiminish the rising healthcare costs of contemporary society. With the average cost ofhealthcare for a 65-year old healthy couple retiring this year hovering at an astounding
$394,954, it is time to take action:
Long-term Care
Intended to cover anestablished period oftime, long-term care
insuranceencompasses health-
care-related expenseslike at-home care orassisted living, two
aspects of healthcarethat are all-too-ofteneither very limited in
coverage orcompletely absent
from plans to beginwith.
Michael Resnick, a ChiefFinancial Planner at GCG
Financial, speaks up, “I have aclient whose husband did
almost everything right inplanning for retirement.
The one thing he missed inhis retirement planning was
long-term care insurance,and now he has dementia
and his wife was forced toput him into a facility. Nowthe wife is concerned that
she may not be able toafford to stay in her home.”
This anecdote is a commontragedy; and sadly enough,
there really is no simple answer.While, yes, long-term care
insurance could have workedhere, that does not
acknowledge the fact that thecosts are high, and the
different plans are difficult toimplement and use to your
advantage. Not to mention,there is no guarantee that
premiums won’t rise, and thatwould only further strain thefiscal situation. So, while yes,
LTCI is worth keeping in mind, itis not necessarily always the
right choice.
Medicaid Planning
While many have the ‘luxury’ to rely on Medicaid to cover LTCIexpenses, there is a central issue. You can only qualify for
Medicaid if all of your other assets have been depleted, used up,are gone. This means that you have literally nothing to leave forbeneficiaries, and are entirely unable to supplement your care.
However, there is a way around this. Set up a “Medicaid-proof Trust,” which is essentially an irrevocable trust that
passes along its contents to your heirs when you passaway. A trustee needs to be established, and then they cansupplement care with those assets in the trust. That said,
there is no guarantee that the trustee will do so, since theydon’t have to do so. In light of such, make sure you knowthe trustee will be more than willing to supplement your
care when the time comes.
Self-insuredPaying expenses out of pocket is an option,
albeit an expensive one. Generally reservedfor high-net-worth individuals, it tends to
mean that people will spend the money theysaved earlier in life when they were younger
in order to enjoy retirement to a greaterdegree. However, again, this option can bevery pricey and will often mean that there
will be less left behind for heirs.
Just as well, should you opt to self-insure, you need to be aware that therecould possibly be extreme tax implications (and penalties) if you decide to
liquidate stocks, bonds, or anything of the sort.
When considering your fiscal future, it pays to think now rather than later. Assess youroptions. Speak to a professional—and make the decision that makes the most sense for you.