Long-Term Care Planning
Long-term care can wreck your retirement plans. This is a sobering reality; especially if you have worked hard all your adult life and are looking forward to a comfortable, secure retirement. Home health care expenses can run well over $20,000 per year, if you require assistance just 25 hours per week at $16 per hour. Should you require additional skills and equipment, as well as additional hours of care, then the cost can be significantly more. Care in an assisted living facility is averaging about $25,000 per year, and a recent annual survey found the 2013 median annual rate for a private nursing home room to be $83,950. These long-term care costs are significant and are only increasing.
So, what can you do?
Get informed and take action!
Unfortunately, many financial plans focus on playing “offense” in terms of growing your retirement dollars and forget to prove a strong “defense” to protect those dollars once you retire. Unless you have a well-designed strategy should you or your spouse become a long-term care statistic, then your retirement nest egg could expire before you do. Therefore, long-term care planning should be an equal focus with your retirement investment strategy.
Before considering long-term care planning options, you need to address two common misunderstandings: Medicare and Medicaid. First, many retirees mistakenly believe that Medicare will pay for their long-term care. This is a dangerous mistake. Medicare does not pay for chronic long-term care needs, only acute nursing home rehabilitation. In other words, it will not pay for services to help you with the “activities of daily living,” but only for services to get you better. Then, if you are eligible for Medicare payments, the payments only last for up to 100 days (with full payment for only 20 of those days). You cannot count on Medigap (i.e., Medicare Supplement) policies either. They will not pay for your long-term care expenses, but some Medigap policies may help cover “gaps” in the Medicare payments during the period you may receive Medicare coverage.
What about giving away your assets to your loved ones so you can qualify for the “means-tested” Medicaid program? Legally speaking, any transfer of assets for less than fair market value (i.e., a gift) may subject you to a lengthy period of ineligibility under the complex and confusing web of Medicaid rules and regulations. Besides, transferring your assets to your loved ones can be hazardous for a variety of reasons.
What if your transfer of assets for Medicaid purposes rendered you ineligible for Medicaid assistance AND then your loved ones subsequently lost the assets through squandering, divorces, lawsuits or bankruptcies? Not good planning.
Insurance and Elder Law
The key to long-term care planning is to plan now rather than to react later.
One of the best strategies may be to insure your retirement financial security through proper long-term care insurance. Do not procrastinate until you have a change in your health, or this option may not be available. In reality, your “health” actually purchases the long-term care insurance and your money just pays the premiums. Besides the insurance option, there are numerous legitimate legal strategies to preserve more of your assets, but only if you do not wait too long. The experience and counsel of a qualified and knowledgeable elder law attorney can be extremely beneficial in planning your future. It can mean the difference between enjoying your retirement and worrying about how you will get by if something unfortunate occurs.