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Five Tips to Ensure You Are Prepared for Long-Term Care in Retirement

Five Tips to Ensure You Are Prepared for Long-Term Care in Retirement

May 27, 2024

As Gen X-ers and Millennials move toward retirement, long-term care expenses are poised to make up an even larger share of their retirement expenses. In 2021, long-term care cost American adults an average of between $35,000 and $108,000 annually—a hefty price tag for even the most diligent savers.1

But if you start planning early and focus on your goals, preparing for long-term care doesn't need to be an insurmountable hurdle. Here are five tips to help guide your path.

Understand What Medicare and Medicaid Cover

Medicare is a type of health insurance available to adults 65 and older (and some adults under 65 with certain health conditions). Meanwhile, Medicaid is a program that provides health coverage for those with limited income and assets.2

Although Medicare provides limited coverage for skilled nursing care and rehabilitation services, it doesn't cover most long-term care expenses. Conversely, Medicaid may cover long-term care costs for those with limited income and assets, but eligibility requirements vary from state to state.

Don't fall into the all-too-common trap of assuming Medicare covers your nursing home or assisted living costs. Unless you qualify for Medicaid or have coverage through another source, you may have to pay out of pocket.

Consider Long-Term Care Insurance

If, like many, you cannot afford to pay $100,000 or more per year out of pocket for a nursing home, you should investigate whether long-term care insurance may step in to fill the gap. This insurance may help cover the costs of services not typically covered by health insurance or Medicare. When investigating this option, research the policy options, premiums, and coverage limits to help find a plan that aligns with your needs and budget.

Explore Hybrid Insurance Policies

Hybrid long-term care insurance policies combine long-term care insurance coverage with life insurance or annuities and might be a more flexible option for many families. These policies provide benefits to pay long-term care expenses while also offering a death benefit or cash value component if you don't end up using the long-term care benefit.



Save Strategically

While saving for retirement, allocate some of these savings for long-term care expenses. You may want to consider opening a dedicated account or investment fund designated for this purpose. This way, when you begin making withdrawals from your 401(k), IRA, and other retirement accounts, you may leave your long-term care fund alone so it continues to grow.

Create a Comprehensive Financial Plan and Update it Regularly

Work with a financial professional to create a comprehensive retirement goal that provides for long-term care expenses. When projecting future care costs, you may want to consider factors like inflation, potential investment returns, and health status.

Because life circumstances and financial goals may change over time, reviewing and updating your long-term care goals regularly is essential. Reassess your financial situation, insurance coverage, and long-term care needs to help adequately prepare for whatever may come your way.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which Long-Term Care product(s), Life insurance product(s) or investment(s) may be appropriate for you, consult your financial professional prior to purchasing or investing.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking # 552909



1 Average Cost of Long-Term Care by State + How To Plan

2 Medicare and Medicaid