As Baby Boomers Age, Families Have More Options For Providing And Paying For Their Care

Much has changed in the past two decades when it comes to Long-Term-Care options and how to fund them. Baby boomers and subsequent generations will need to plan for LTC in a different way than their parents in light of factors such as longer life spans, the uncertain future of entitlement benefits and rapidly rising medical costs.

You  have choices when it comes to planning for long-term care that include earmarking savings for long-term medical expenses, relying on entitlement benefits, or depending on family.

LTC insurance is another option for aging baby boomers to consider because these insurance products have evolved along with current trends and care options. Unlike many policies in the past that directly paid a nursing facility, many current policies pay the benefit to the insured. In fact, half of benefits paid by private insurers for LTC are not for skilled nursing care, but rather for care in the home or assisted living facilities.

Most LTC insurance policies now pay whether the recipient is their own home, day care, receiving custodial care in an assisted-living facility or skilled care in a nursing home.

When the topic of LTC arises in your family, you may assume the “it won’t happen to me” attitude, yet about 70% of people over age 65 will need some type of assistance during retirement.

Increased longevity and medical advances have created more demand for LTC and this need is even more profound for females; about 2/3 of Americans over age 85 are female, and almost half of this group has some form of cognitive impairment.

It’s difficult to predict what kind of LTC needs you may have — and often those needs are difficult to discuss. One way to begin the conversation is to discuss how your parents aged and what kind of care they received. There are significant differences between how your parents may have approached LTC and how you might think of it.

Parents of baby boomers were the first to experience extended longevity and arguably among the first to have access to formal long-term nursing care facilities. But for the silent generation, the question of whether entitlements would really be there was not often asked. Retiring boomers are causing a well-publicized strain on government entitlement programs and it’s no surprise that current benefits probably won’t cover most medical services a person with LTC needs will require.

Most retirees wouldn’t choose to rely on these types of benefits or plan to live in government-operated facilities if they need LTC, but based on what we know about the average American’s retirement savings, most also won’t have enough savings to fund an extended LTC stay. This is where insurance comes in.  An entire industry has been created around retiring baby boomers and insurance providers have also evolved and relied on innovation to fit the needs of this aging population.

Most LTC policies pay a benefit up to the daily or monthly maximum. The amount can be paid to the insured, who can then pay the care provider, or the insured can arrange for the care provider to bill the insurance company directly.

Advanced benefit riders are additions to a life insurance policy that allow the death benefit (often up to 90%) to be paid in advance of death if the funds are needed for LTC. Whatever amount is advanced to the insured is simply deducted from the death benefit when that person dies. However, it can require a huge existing life insurance policy to fund LTC services for very long.

An option for many retirees with long-term-care needs is relying on family for support as their parents may have. However the emotional, physical and financial stress on family members caring for a dependent family member can be immense. While you may choose to rely on family for physical or financial support down the road, it’s important that you know the associated costs of doing so. Have a conversation about whether you want or need to rely on family as you age. You may also discuss insurance or bookmarking a pool of assets to supplement the support you receive.

Lastly, bear in mind that strategies exist to help even those who may now need care, but did not plan ahead.  A reverse mortgage might become an unexpected source of funds.  Additional strategies may stretch these funds to last longer than you might expect.  As a last resort, consider protecting your final expense funds with an irrevocable burial trust, as Medicaid typically requires not only impoverishment, but the liquidation of any life insurance policies remaining. 

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