A WORRY-FREE RETIREMENT: Enjoy yourself knowing you are protected

In retirement your assets generate your income. And to have the kind of retirement you’ve always wanted – spending time with your family, traveling and more – you have to ensure that your retirement income is protected.

To enjoy retirement without having to make any drastic lifestyle changes, without having to rely on help from your friends or family, and without having to accept substandard levels of care as you age, your retirement income strategy has to account for three important factors:

• How long you will live
• How long your investments will perform over time
• How much you will spend each year in retirement

Protect yourself and your family from the unknown costs of health care.

The unknown cost of health care is among the most significant risks to any retirement plan. Unlike most spending in retirement, health care spending increases with age on average and is far more volatile. And 70% of people turning 65 today will eventually need some form of long-term care in their lifetimes.

With traditional health-based long-term care insurance, you pay insurance premiums to help protect yourself in the event that you require long-term care. As history shows, the premiums will likely increase over time, and if you ever need it, this form of long-term care insurance offers no benefit.

A different generation of protection, such as life insurance or annuities combined with long-term care, creates a hybrid or asset-based product consideration. This approach protects against long-term care expenditures while also providing a guaranteed death benefit, which guards against the possibility of lost premiums.

How asset-based long-term care works.

Currently more than 70 percent of people over the age of 65 will need long-term care in their lifetime. Who would take care of you? How would you pay for long-term care? Life insurance with asset-based long-term care benefits could help your family maintain its quality of life and give you a comfortable level of care.

Will you need long-term care? The statistics say more than likely. With the life expectancy continuing to grow, those statistics will grow stronger.

While the numbers say you should prepare for long-term care, how you will pay for it is becoming complex. Medicare, health or disability insurance, long-term care insurance, reverse mortgages, life insurance are just some of the possible sources, but can also have limited benefits.

Some reasons life with asset based long-term care benefits might be of interest to you include:

• It can be purchased for a single person or two people with benefits available for both.
• Premiums never increase, and your benefits cannot change.
• Because it is built on life insurance, your policy’s death benefit goes to your beneficiaries if you don’t use it for long-term care.
• Long-term care protection becomes available when you cannot perform two of the following activities of daily living: bathing, dressing, eating, continence, toileting, transferring or if you have cognitive impairment (such as Alzheimer’s disease).
• Choose protection for a specific number of months or get extended, guaranteed lifetime benefits as an option.
• A broad range of qualifying long-term care expenses means you can receive care in your home, use adult day care facilities or stay at a nursing home or assisted living facility. Covered care also includes qualifying hospice care, respite care, caregiver training and supportive equipment.

How much long-term care insurance do you need?

The amount of long-term care coverage you need will depend on your retirement funds, other incomes, part of the country you receive your care, and the type of care you want.

A number of those parameters are moving targets. Some are not. For example, women average longer long-term care needs (3.7 years) than men (2.2 years).

When it comes to creating an amount of coverage, here is a series of questions that can help you narrow the range of the coverage you may need in the future:

• Has a family member ever needed long-term care?
• Is there a family history of long-term illnesses?
• Does the long-term care policy need to cover the entire expense?
• What changes need to be made to your home for long-term care?
• How much of your care can be provided by family?
• Are you willing to enter an assisted living facility or nursing home?
• What assets do you want to pass along?

What is long-term care?

For many people long-term care is synonymous with living in a nursing home. Actually, there are more options than ever to help you maintain comfort and dignity during a care need, including receiving care in your own home. Preparing for long-term care should address your health, wellness, and personal preferences as well as your financial needs.

Help with activities of daily living.

Aging, accidents, illnesses, and chronic conditions may limit your ability to care for yourself. When this happens, you need access to quality care. You also may need assistance with every day, personal tasks. Licensed long-term care providers and long-term care facilities can help with these and other types of “activities of daily living,” including:

• Bathing
• Continence
• Dressing
• Eating
• Toileting
• Transferring (moving in and out of bed)

There are other everyday tasks that you may need assistance with, including:

• Housework
• Managing money
• Taking medication
• Preparing and cleaning up after meals
• Shopping for groceries or clothes
• Using the telephone or other communication devices
• Caring for pets
• Responding to emergency alerts such as fire alarms

Access to professional care when you need it.

Long-term care may arise sooner than you think. Short-term access to long-term care can help you recover from a sudden illness or injury. For example, while recovering from hip surgery, you may need rehabilitation therapy that requires several weeks or a few months at a nursing facility.

No one wants to think “This could be me,” and no one can predict the future. But, according to the U.S. Department of Health and Human Services:

• More than half of those 65 today will need some type of long-term care services and support. The average cost of those services and support is $138,000.
• Women generally need care for longer periods than men. As a result the average cost of long-term services and support for men is $91,000 and doubles ($182,000) for women.

Help at home or in a qualified facility?

Right now, you may have very strong feelings about where you want to live and who will take care of you – should the time come. Some prefer to have a spouse or adult child provide care at home. But caregiving puts demands and stress on your loved ones. A dedicated caregiver may have to give up a career, forego income, miss family time, and ultimately sacrifice his or her own health and wellness.

Even in large families where adult children, siblings, or other relatives want to share the load, the stress of the situation may change family dynamics or trigger disagreements.

A highly variable expense.

The cost of long-term care varies immensely depending on the type of care needed, where it is received and where you live. Many people turn to long-term care insurance options to pay for long-term care expenses.

Other people choose self-funding approaches to long-term care, which may require you to bear the entire cost burden yourself. To self-fund long-term care, you need cash savings or liquid assets like the equity in your home. If care is needed for an extended period of time, these resources can quickly deplete and affect the inheritance you can leave.

Innovative Funding Options.

An alternative to traditional long-term care insurance is asset-based long-term care, which lets you use your assets to purchase a fixed whole life insurance policy or annuities that can provide benefits for qualifying long-term care expenses. And, if care is never needed, these products can provide benefits to your heirs.

David Wingate is an elder law attorney at the Elder Law Office of David Wingate, LLC. The elder law office services clients with powers of attorneys, living wills, Wills, Trusts, Medicaid and asset protection. The Elder Law office has locations in Frederick and Montgomery Counties, Maryland.