Paying for Long-Term Care: Why It Pays to Know Your Options

Budgeting for long-term care is one of the most important aspects of retirement planning. The costs associated with nursing homes and other types of elder assistance are simply too high to ignore. Many healthcare plans, including Medicare, don’t cover expenses related to long-term care, and Medicaid is only an option for those falling into low income brackets. Taking the time to evaluate the many options for paying for long-term care before the funds are needed is the best way to ensure that you or your loved ones will get what they need later in life.

Understanding Health Insurance Coverage

A basic of understanding of your current health insurance* will help you find ways to fill in the gaps in coverage. According to the Department of Health and Human Services’ long-term care website, Medicare covers expenses for short-term medical conditions that are expected to improve. Medicare also covers end-of-life hospice care. In general, it also offers payment for short-term assistance but does not pay for long-term care.

If you or a family member meet low income thresholds, Medicaid may cover some costs of long-term care. However, a “look-back period” is in effect, meaning you cannot simply transfer all of your assets to relatives and immediately qualify for Medicaid.

Paying Out of Pocket

Earmarking a portion of your retirement savings for long-term care is one way to ensure that you’ll be able to pay for services if and when you need them. Many people budget and pay for long-term care out of pocket. To help you estimate the annual expenses, use AARP‘s cost calculator, which incorporates geographical differences in pricing as well as various types of in-home vs. nursing home care.

If you’re thinking about saving for long-term care, placing assets in a trust* will help ensure that a portion of your wealth is preserved for future assisted living expenses. Consult a professional for assistance when establishing a trust as it must be structured properly in order to pay for long-term care.

Considering Other Options

If you’re concerned about running out of savings when faced with long-term care expenses, there are other options to help you outside of your retirement savings. Though long-term care insurance* is available, like all insurance, it’s an added household expense that must be budgeted for each year. Certain annuities can also be structured to help cover long-term care costs. And reverse mortgage loans are another option.

As more older Americans are expected to require long-term care services, these expenses are becoming a necessary part of any retirement planning discussion. A financial advisor can help you determine how much you need to save based on your current age, income and long-term financial goals.

*Investment products are offered through Key Investment Services LLC (KIS), member FINRA/SIPC. KIS is affiliated with KeyBank National Association (KeyBank). Investment products made available through KIS are:

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KIS and KeyBank are separate entities, and when you buy or sell securities you are doing business with KIS, and not KeyBank.

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