Long-Term Care

Paying for Health Care and Long Term Care Expenses



75% Americans Have No Long-Term Care Insurance*

Medicare Will Not Pay For Long-Term Care*

Medicaid Pays For 50% of Nursing Home Stays*

$76,000 Annual Average Monthly Cost for a Semi-Private Room in Georgia*

For many retirees, paying for out-of-pocket medical expenses will become a huge drain on their retirement savings. These expenses include everything not covered by Medicare and the various supplemental medical plans, as well as long-term care expenses. Remember, Medicare does not pay for long-term care!

The Price Tag for LTC

According to Fidelity Investments, couples now approaching retirement may spend upwards of $250,000*, or about $12,000 per year, on out-of-pocket expenses, including co-pays for medical care and prescription drugs (based on an average of 20+ years spent in retirement).

Long-term Care rates vary by state, but the national average for 2018 hovers at around $7,500 per month. The average length of stay in long-term care is 2-3 years.

With costs becoming almost prohibitive, many insurers are pulling out of the long-term care market. This may present a considerable problem in the future.
According to AARP, in the year 2000, there were 125 insurance carriers providing long-term care coverage.

By 2018 Only 18 LTC Carriers Were Offering Individual LTC

Options for Paying for LTC 

1. Self-insure. The dangers here are obvious. Unless you have large retirement savings, at almost $70,000-$100,000 per year for long-term care alone, one can deplete a sizeable nest egg in a hurry.

2. Buy private long-term care insurance at a cost of $3,000 to 4,500 per year, per person, (and rising). In the event that long-term care is not needed, the premium is not refunded.

A New Option: Asset Based LTC

Asset-based long-term care is an innovative insurance strategy that provides coverage for long-term care expenses without running the risk of “wasting” premiums if you don’t need long-term care.

These newer hybrid life insurance policies are funded with a single premium, often from low interest-paying assets, and use a portion of the death benefits to pay for healthcare-related expenses. They are generally designed to pay for both in-home and extended care LTC expenses. Some will fund LTC and/ or health care expenses for as much as 3 to 4 times the amount of the original insurance premium.
Some products will return the full amount of the original premium upon request at any time.

The IRA Option

IRA-Funded LTC: Using new generation insurance products, you can convert your IRA to pay for LTC health care expenses, with minimal tax impact.

An Option to Use Older Annuities or Life Insurance Policies

The IRS will permit transfers of existing older annuities or life insurance policies to the newer hybrid insurance/annuity products using an IRS CODE 1035 Exchange/Transfer. Properly done, there is no tax on the transfer. This is an excellent way to maximize existing annuity and life insurance policies as well as pay for future LTC expenses.
These strategies could be used for ensuring that funds would be available if needed for LTC or health care expenses without paying any more insurance premiums.

Using a Reverse Mortgage

While an understanding of the topic of a Reverse Mortgage is beyond the scope of this discussion, money or income from a Reverse Mortgage could be another option to take advantage of using certain real estate assets to offset the expenses created by the need for extensive LTC.

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Successful Retirement Panning is all about minimizing and managing these risks.


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