Long-Term Care

The majority of people living into their 70s, 80s, and even their 90s do so in relatively good health. Still, roughly four in ten people age 65 or older will need some long-term care. That care can be very expensive. Here are five options for paying or providing for that care.

Personal care. Traditionally, unpaid family members have provided long-term care for disabled people at home. Today, fewer families can provide this personal care. The demand is growing for professional---and expensive---care, either at home or in care facilities.

Personal income and savings. Individuals pay roughly one third of the nation’s total long-term care costs out of their pockets. According to the Alzheimer’s Association, the average lifetime cost to care for a person with Alzheimer’s is $175,000, and one out of three families who care for a seriously ill family member deplete their savings.

Life Insurance. Increasingly, people are turning to their life insurance to help pay for their long-term care costs. They may be able to borrow from the policy’s cash value. Some policies pay out an "accelerated benefit," which may run as high as 90 or 95 percent of the policy’s death benefit if the insured's life expectancy is 6 to 12 months.

Some people sell their policy to a third party in a viatical settlement. They are paid a portion of the face value, 50 or 80 percent, depending on their life expectancy.

Medicare and Medigap. Medicare covers less than ten percent of the nation’s total nursing home costs. Supplemental Medicare insurance---"medigap"---will pay a portion of skilled nursing care but not custodial care.

Long-term care insurance. Most long-term care insurance, which pays a daily benefit (usually tax-free) for a defined or unlimited period of time, is bought privately.

Experts debate the quality of long-term care policies. Proponents point out that a lifetime of premiums usually amounts to no more than a single year’s stay in a nursing home. Before purchasing a policy, talk with your Certified Financial Planner professional to determine whether a policy is right for you or a loved one such as a parent.