As people age, they may require additional assistance with activities of daily living, such as bathing, dressing, and grooming. Others may need 24/7 skilled nursing care for chronic healthcare conditions. This type of care is known as long-term care and can be provided in a variety of settings, such as in the person’s home, in a nursing home or in an assisted living facility.
The cost of long-term care depends on the services that are provided and where they are delivered. It can be expensive, and many people don’t have enough saved up to cover the costs. Many people underestimate the cost of long-term care and end up paying more than they expected. Therefore, it is important to plan for long-term care costs as soon as possible, especially if you’re nearing retirement age. Start by researching your options and how much they will cost to help you plan for long-term care expenses.
Here are a few options that can help pay for long-term care:
Purchase long-term care insurance
One way to financially prepare for the potential costs of long-term care is to purchase long-term care insurance. This type of policy helps cover the costs of nursing homes, in-home health care, and other types of assistance that may be needed as seniors age.
While premiums for long-term care insurance can be expensive, they often pale in comparison to the out-of-pocket costs that can be incurred if long-term care is needed. In addition, many policies offer features such as inflation protection and coverage for multiple people, so that the cost of coverage can be spread among several family members. There are several types of long-term care insurance policies available. Some policies pay a fixed amount each day, while others pay a percentage of the cost of care. Policies may also have different maximum payout amounts.
Some policies do not pay for care in a nursing home, while others will only pay for a certain number of days in a nursing home. Policies may also have different limits on the number of years they will cover care. It is important to carefully review all the options available before purchasing a long-term care policy, as not all policies are created equal.
Keep in mind that people usually need a broker or agent to buy a long-term care insurance policy. It’s wise to speak with several brokers and agents as well as to ask for recommendations from other friends or family who have purchased policies. Many brokers and agents deal with just a few insurance companies, however, there are also independent agents who can offer policies from a larger number of companies. If you’re working with a financial planner, they may also be able to make good recommendations.
Apply for state and government funded programs
You can apply for Medicaid or other government assistance programs to pay for long-term care. Medicaid is a joint federal and state program that helps low-income individuals and families pay for health care costs. To be eligible for Medicaid coverage of long-term care, a senior must meet certain income and asset requirements. You can find the Medicaid Office in your state here.
Another state program that can help pay for long-term care is the Veterans Affairs Aid and Attendance Benefit. This benefit provides financial assistance to veterans and their spouses who need help with everyday activities due to illness or disability.
Obtain a loan from a bank or private lender
One option for financing long-term care is to get a loan from a bank or private lender. This may be a good option for those who are not eligible for government assistance or do not have enough saved up to cover the cost of care. There are many different types of loans available, so it is important to research the options and find one that fits your needs. Some loans have low interest rates and others offer you the chance to borrow against your home equity.
One benefit of using your home equity to pay for long-term care is that the interest may be tax deductible. Another benefit is that you can typically borrow more money with a home equity loan than you could with a regular loan. This can be helpful if you need a lot of money for long-term care. Be sure to compare the terms of different loans and ask questions so you understand all the costs involved.
Use your savings or retirement funds
The cost of long-term care for seniors can be expensive, and many people wonder if they should use their savings or retirement funds to pay for it. There are a few key things to consider when making this decision.
First, think about how much money you will need to cover the costs of long-term care. The average yearly cost of a nursing home is $80,000, and the average yearly cost of in-home care is $45,000.
Second, think about how long you will need long term care. Most people only need it for a few years, but some may need it for longer. If you don’t have enough money saved up to cover these costs, you may need to use your retirement funds or investigate the other options covered in this article. A financial or retirement advisor may be helpful to you as you evaluate the funds needed to pay for long-term care.
Additional Resources
To help seniors and their families with this topic, I co-authored a book with senior thought leader Ben Rao that provides a comprehensive overview of senior service providers, resources, and senior living options, along with the costs of long-term care and how to pay for it. Download a free copy of Paying for Long-Term Care: The Essential Guide to Understanding and Funding Senior Care for more information.
Whatever your circumstances, start thinking about your future needs and determine a plan that will cover care for you and your family. The costs of long-term care can add up quickly, so it’s important to understand your options for paying for it. Fortunately, many states have programs in place to help seniors pay for long-term care. It is easy to put off planning for long-term care, but worth the time so that if the unexpected happens you will have one less thing to worry about.