Considering all the details around end of life care can be daunting. People often put off planning because they are uncomfortable even thinking about it. Retirement is hard enough, but preparing for an extended period of incapacitation isn’t something many want to consider. Ignoring this highly likely possibility, though, not only could negatively impact you, but also your loved ones. Depending on the type of care, yearly costs are often somewhere between $50,000 and $80,000. Rather than be caught off guard, our four main solutions offer ways to be prepared financially. These solutions are not mutually exclusive; they can be mixed to provide the best coverage for your situation.
Cardinal Advisors Long-Term Care Plans
- Self-Insurance – The first type of plan we offer as a solution is self-insurance. If you are financially able, arranging your own money and assets can make the most sense. For all of our plans, we use $6,000 per month in present dollars as the typical goal for income. If needed, we can increase or decrease this number to suit each client’s situation. Each plan achieves that aim differently, but those who self-insure just have to plan their Social Security, pensions, and other retirement assets to cover a set period of time. There are some health problems that may eliminate all options other than self-insurance.
- Short-Term Care Insurance – This is a common plan that charges a monthly premium to protect from a sudden incapacitating malady. For around $100 a month, a 70-year-old female nonsmoker can often be covered. It only covers in the short term, though, so the $6,000 monthly payments only last a year. If these payments are not fully used, they can be saved and spent later, extending their utility beyond the year. It is important for the family to use this year as an opportunity to plan for the future and find self-insuring options.
- Traditional Long-Term Care Insurance – If the short-term plans are called so because they only last a year, these long-term plans get their name because their coverage is for multiple years. While some plans last many years, we do not advise getting over five years of coverage because the premiums become large and unmanageable. Another disadvantage of the long-term plans is the premiums can be raised, forcing people to drop plans when they are more vulnerable and likely to soon need them. However, the long-term care insurance option is still the best in certain cases.
- Hybrid Long-Term Care Insurance – The hybrid model of long-term care insurance is an increasingly popular funding strategy. One option allows the person to pay one large, lump sum to the company for coverage. They never have to worry about premiums increasing and can even get their money back (minus accrued interest) if they decide to cancel their policy. Some life insurance policies now even allow for advanced payments from the death benefit for long-term care costs. The hybrid plan is among the more flexible options.
Without sitting down for a consultation, it’s impossible to say which of the four strategies would be best in the unique circumstances of you and your family. Employment, family wealth and assets, life preferences, and many other factors will play a role in crafting the best plan for you. One thing is certain, though, doing nothing and hoping for the best while aging inevitably affects you and your loved ones. Call Cardinal Advisors today located in Raleigh, North Carolina and we can get to work putting together your plan.
Hans Scheil is the author of “The Complete Cardinal Guide to Planning for and Living in Retirement” and the accompanying workbook. He can be reached at Hans@CardinalGuide.com.