As we’ve covered elsewhere on the site, long-term care (LTC) can be expensive and often requires funding from a few different places. Undoubtedly, the hardest part of starting your LTC plan is getting started. With that in mind, we put together this simple check list to get you started. In alphabetical order, we’ve listed various sources of funding you should consider. For each option, you will find pros and cons and the next steps you should take in determining whether the option is suitable for you. You can check off different milestones and options as you go along.
Option 1: Disability Insurance
- You do not need a health exam when obtained through your employer.
- Pays you when you cannot work.
- You need to meet disability requirements before receiving benefits
- It may not cover all of your health or LTC expenses.
- It does not replace your full income, just a percentage.
- To determine the amount of coverage you need, calculator monthly expenses and determine income from all possible sources, including your job, investments, and payments from the government.
- Find out if your employer-provided insurance covers both short term and long term disability, and find out if the policy amount will cover your needs.
- Look into private coverage even if your employer offers an acceptable policy, which will end if you leave the job. Compare disability insurance quotes from multiple companies.
Option 2: Employer Sponsored Health Care
- Your company will typically cover part of the cost
- The insurance premiums are taken directly out of your paycheck
- Unlikely to be available when you retire
- Unlikely to cover LTC costs
- Find out if your health plan includes LTC coverage, which is unlikely.
- Figure out a plan for keeping your health plan or finding a new one if you leave your job or retire.
Option 3: Family-Provided LTC
- Few monetary costs, making it the least expensive option
- Works well when supplemented with formal, professional care
- Could lead to extensive time costs for your family and may hurt relationships
- Your family cannot provide professional care, which may be necessary
- Explore state and county programs offered by the government which may assist your family.
- Have an open discussion with family members about the possibility of providing care.
Option 4: Life Insurance
- You may already be paying for life insurance
- Often an option for those who do not qualify for long-term care insurance
- Unlikely to cover LTC
- You may be unable to get the full value of your policy
- You will need a special agreement with your insurance provider such as a life settlement
- Whether or not you have coverage, speak to a financial advisor / financial planner to find out how much insurance you need and the kind of coverage that you want in your policy.
- If you do not already have a life insurance policy, begin shopping for one. Compare quotes from multiple insurance companies.
- If you have a policy, find out if it covers LTC, which most do not.
- If your policy does not cover LTC, begin looking into options such as life settlement and accelerated death benefits.
Option 5: Long-Term Care Annuity
- Easier to qualify
- You can leave any remainder to your family or other loved ones
- It may not cover all of your LTC expenses
- Inflation risk
- Can complicate your taxes
- Since this is a complicated product, strongly consider speaking to a financial advisor / financial planner.
- Find out if your retirement benefits include annuities.
- Compare multiple annuities to find the one that best suits your needs.
Option 6: Long-Term Care Insurance
- Created specifically to pay for the costs of long-term care
- The right policy may cover the vast majority of your costs
- Can be expensive, particularly for older individuals
- May require health exam
- You will lose coverage if you do not pay the premiums
- Research LTC insurance benefits that you can receive through your company.
- If you cannot receive coverage through work or are not satisfied with what’s offered, begin search for your own policy. Consider speaking to a financial advisor / financial planner.
- Compare quotes from multiple LTC insurance companies.
Option 7: Medicaid
- Provided by the government
- Will cover LTC for those who qualify
- Only eligible if you meet strict financial requirements
- The program can change at any time
- Little to no coverage for home care, the most common from of LTC
- Find out if you are eligible by contacting or visiting your local Area Agency on Aging. You can find contact information at www.eldercare.gov or by calling 1-800-677-1116.
- Visit www.cms.hhs.gov/apps/contacts/ and reach out to your local medical assistance office to learn more about Medicaid.
- Find local facilities that accept Medicaid and visit them. Make sure that you are comfortable with the care that will be provided.
Option 8: Medicare
- Provided by the government
- Multiple options for care and medication
- Covers LTC costs for 100 days, the only pays for care from the hospital
- Does not cover non-medical, custodial care
- Learn about Medicare at www.medicare.gov and find out how much coverage you can expect.
- Contact your local State Health Insurance Assistance Program office, which you can find on the Medicare website.
Option 9: Self-Insurance / Personal Savings
- Do not need to pay for insurance
- Complete flexibility on how to spend for LTC
- Must remember to save the proper amount on the schedule you determine
- You may underestimate costs or not save enough
- Find out how much you can expect to spend on long-term care in your lifetime.
- Look at your income and expenses and figure out how much you can afford to save. Take a look at conservative investment options for your savings. You may wish to consult with a financial advisor / financial planner.
- Compare the amount you plan to save to your potential costs.
Option 10: Reverse Mortgage
- Helps older homeowners tap into the equity in their homes, which is often substantial
- Expensive, complicated financial product
- Age restriction – only available to homeowners 62 and up
- Can lead to foreclosure if certain requirements are not met
- Learn as much as you can about reverse mortgages. Two places to start: The US Department of Housing and Urban Development and Reverse Mortgage Alert.
- Speak to a financial advisor / financial planner.
- Keep your family and loved ones informed as you go through the process.
What to Do Next
As you may have guessed by now, we strongly suggest that you work with a financial planner or financial advisor while making these decisions. Now that you’ve reached the end of the checklist, we again recommend that you take this course of action. It’s also a good idea to begin putting together a retirement budget to get a handle on the resources that you will need later in life.