If someone asked you if Obamacare covered long-term care, what would your answer be? If you answered ‘yes’, you’d be wrong, but you’d also be among 72% of boomers who thought it was covered, just like you. Next question: Do you think you’ll ever need it? If you answered ‘no’, then, again, you’d be in the minority of respondents. Only 24% of those over 40 who responded thought that they’d ever need care. According to the AP-NORC Center for Public Affairs Research study, more than 70% of retirees will need some form of care as they age.(http://www.apnorc.org/projects/Pages/long-term-care-perceptions-experiences-and-attitudes-among-americans-40-or-older.aspx)
Finally, if you had to put a cost on long-term care, what would your answer be to this? Here’s where it gets really scary. The typical Boomer expects care to cost $36,220 dollars a year, when in reality, according to industry averages, the annual cost of a nursing home in Detroit for a private room is $93,075!! That’s the average, folks. And, the amount people think they’ll have to pay is actually declining, due to their belief that Obamacare will help pay.
Well, there’s always Medicaid, right? Maybe. In order to qualify, you must run down all of your assets – home, car, jewelry, cash, etc., to $113,000 or below. Doable, but how does this impact your spouse who doesn’t need care? What kind of standard of living can they expect if you’ve had to spend down all your money? But, you ask, why can’t I just give it to my kids? At least the family will still have my assets, and I’ll be Medicaid-eligible. The simple answer is you can give it away. However, you must have given it away at least 60 months before you apply for Medicaid, due to what is known as the “look-back” period. So, if you suddenly need help with normal daily activities and you have too many assets, you won’t be eligible for Medicaid until 5 years of your gifting all of your assets. In that 5-year period, you are expected to pay for the cost of care.
What can you do? Again, the answer is simple, but the means may not be. You can buy a traditional long-term care policy that will cover some or all of your care costs, depending on how much you wish to spend. Most policies today cover everything from in-home care to assisted living to nursing home care, and gives you the most bang for your buck. The downside (if this is really a downside) is if you never need it. Your premiums over your lifetime could be $100,000 or more. A popular alternative is a life insurance policy with a long-term care rider. The care is a feature of the death benefit, typically 1 or 2% each month. With this option, if you don’t need it, your family receives a tax-free death benefit. If you do use it, there is still a 10% residual death benefit, which could be used for the funeral or paying off some debt.
Sit down with your advisors – your accountant, your financial planner, and yes, your insurance agent, and get the information necessary to make an educated decision. Protect your assets and protect your family’s standard of living, while protecting your dignity. Just remember, after the fact is too late, and apologizing to your family won’t make you feel any better.