For many of us, living into our Golden Years will require no small amount of, well, gold. A recent report from the U.S. Department of Health and Human Services found that a full 70% of those reaching the age of 65 this year will require some amount of long-term care in the years that are left to them.
That number is likely to increase along with our rising life expectancies, as the medical advances that reduce the dangers that cut our lives short do not necessarily improve our level of independence in our later years. Keep in mind that long-term care doesn’t always mean a nursing home; more often than not, long-term care happens as in home health care, either part time or full time.
This statistic is especially notable for women, who will require long-term care for 3.7 years on average. Compare that to the average of 2.2 years of care for men–the average woman will need to pay for over one and a half times the number of years as the average man. The number of people that stay in long-term care for longer than five years is only 20%.
Many Americans have difficulty saving for long-term care, whether a stay in a nursing home or in-home care. It is hard to predict while we are young and healthy just what level of care we will one day require and many in retirement would prefer to save that money for enjoying the time they have left.
Long-term care insurance is the most popular safety net that will give you the care you need while not breaking the bank–for you or your children. Nowadays, you can get a hybrid long-term policy that acts as a life insurance policy if you don’t need to use it for long-term care, so you don’t have to have the “use it or lose it” effect that had been common with long-term care insurance in the past.
Your age and health affect the annual premiums you have to pay, but there are a number of ways to reduce the cost now without sacrificing benefits later. Here are the six best cost-reduction tactics that you can implement immediately:
As a younger person is far less likely to require long-term care, purchasing a policy sooner will cut your initial premiums significantly. That does not mean, however, that these premiums are locked in for the rest of your life. Discuss with your insurer what kind of increase you can expect as you age.
Shorten the Benefit Period
Why pay for more years than you will likely need? We already know that only one in five will be in long-term care for longer than five years, so a shorter-term policy could save you thousands in premiums. Make sure to shop around and compare your options.
Lengthen the Elimination Period
Why pay for coverage before you need it? Policies typically come with a waiting period of 30 to 90 days until your coverage actually begins. If you don’t need it immediately and are confident in your health, see how long you can extend this period to reduce your premiums.
Reduce Daily Benefits
If you do have the funds to cover some portion of your needs on your own, consider a reduction to the policy’s daily benefit amount. The savings from the lower premium could beat the cost of any extra coverage.
Share the Care
Why should you and your spouse purchase individual policies for yourselves when a shared policy could save on premiums and provide better coverage for you both? Provided that you both are relatively healthy and around the same age, the costs will be cheaper and the shared benefits pool will be a major plus.
With a shared benefits pool, each of you gets a plan for the specified duration, but, if one passes on before making full use of the time, the remaining years are then available for the remaining spouse. That means if you purchase a 3-year shared care policy, the two of you receive a total of six years of benefits. If your spouse only uses one of the years on the policy, the remaining five are available to you.
Take the Deduction
Come tax season, you may be able to deduct the cost of your long-term care insurance. Each state may have differing rules on what qualifies for this deduction–and the formula for the exact amount may vary depending on your age and other circumstances. The 2014 tax year limited long-term care premium deductibility to $1,400 for everyone between the ages of fifty and sixty, $3,720 for those between 60 and 70, and $4,600 for all over 70.
To learn more about long-term financial planning for your golden years and other elder law issues, call our office today at 612-206-3701 or reach out via our online contact form to schedule a time for us to sit down and talk about this in an estate planning consultation.
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