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Planning Ahead to Make Your Retirement Years Golden

What will your golden years look like? For many people, visions of cruises, beaches, golf courses and grandchildren fill their minds. People are much less likely to imagine the kind of long-term care that is necessary for many aging adults. While it may not be the blissful daydream of our imaginations, preparing for the possibility of long-term care is an important way to make the most of the golden years.

Who Needs It

Much like wills and life insurance, long-term care isn’t something that people enjoy thinking about. However, whether it is a parent, a spouse, a loved one, or even yourself, there is no denying long-term care is a reality that the majority of adults will have to confront at some point. Estimates from a 2005 study indicate that 69 percent of adults over the age of 65 will need at least one year of long-term care. That’s not all. Americans are living longer than ever, with estimates indicating 1 in 40 men who are age 40 now will see their 100th birthday and 1 in 20 women will celebrate the same milestone. As such, many experts expect that the number of people who need long-term care and the number of years for which care is needed will both increase.

What It Costs

Since the numbers suggest that most Americans will be confronted with the possibility of long-term care at some point, there are other numbers worth considering now: namely, the cost. Long-term care costs vary greatly. Methods of care generally include in-home care, assisted living communities, and nursing homes, though other variations also exist. In 2016, the US Department of Health and Human Services found the average cost of a home health aide was $20.50 per hour, whereas assisted living facilities averaged $3,628 per month and private rooms in nursing homes averaged $7,698 per month. Prices can also vary depending on the time of day that service is needed and how many services beyond basic care are required.

Planning Ahead

With costs clocking in at what most people would consider to be a staggering amount, it is vital individuals begin preparing for long-term care as soon as possible. Long-term care can be paid for in several different ways, including retirement savings, Medicare/Medicaid, long-term care insurance or any combination of the three options. These steps will help individuals be as prepared as possible:
Start now. Most financial experts suggest that adults in their 40s and 50s should begin planning for this care. Many middle-aged individuals have passed significant money milestones, including paying down debt, purchasing a home, or navigating childcare costs. As a result, that is the perfect age to set new financial goals and plan for that part of their future.
Amplify your savings. Since you know you need to start thinking about long-term care now, you also need to familiarize yourself with the three payment options in order to choose a strategy that best suits your needs. Individuals who plan to fund their long-term care even partially through retirement savings should start setting aside money into retirement accounts as soon as possible. The more time your money spends invested in any retirement vehicle, such as IRAs or 401Ks, the more time your money can grow thanks to compounding.
Consider coverage. You will also want to pursue options for long-term care insurance sooner rather than later. While it may be possible to obtain insurance in your 60s or 70s, younger individuals are much more likely to be approved. Additionally, policies tend to cost significantly less for individuals who are younger and in better health. It may also be possible to convert existing life insurance policies into long-term care insurance coverage.
Know the rules. Finally, it is also important to understand Medicare and Medicaid. It is possible to have portions of long-term care covered by these programs, but there are stipulations. In order to be eligible, an individual needs to be 65 years of age. At that point, if a doctor prescribes a rehabilitation program, Medicare will pay for these skilled services at a nursing home or even within an individual’s home. For an individual to quality for Medicaid, however, there are certain financial requirements related to income and assets that must be met. These requirements vary by state, but a general guideline for countable assets is $2,000 for an individual or $3,000 for a married couple.
It is true that preparing for long-term care may not be the stuff that retirement dreams are made of. However, it is a reality that most of us will face. Time spent increasing retirement savings, considering insurance coverage options and understanding how Medicare and Medicaid work now can take the guesswork out of long-term care later. Then, you can get back to daydreaming about the really important parts of your golden years, like mapping your must-see travel destinations or spoiling your grandchildren.
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