Retirement and Long-term Care: Ignore it at Your Own Peril
April 19, 2017
Planning for a retirement that can last 20 or 30 years is an ambitious task. You need reliable sources of retirement income that will cover your living expenses for the rest of your life, no matter how long you live, making sure you factor in future inflation, too. If you've done a good job with this difficult task, congratulations! But you're not finished yet. Protect your good plans from getting blown up by potentially ruinous long-term care expenses.
Long term care expenses are typically for custodial services: assistance with daily living activities when you're unable or too frail to prepare food, bathe or use the bathroom on your own; get dressed; or follow medical directives. Long-term-care expenses aren't medical expenses, so they aren't covered by Medicare or most medical insurance plans.
Planning for long-term care may not be the most inspiring part of your retirement planning, but it's something you can't afford to ignore. If you address this very real threat, you can have some peace of mind about the future, which lets you enjoy what you really want to do in your retirement.
If you want to protect yourself, consider one or more of the following:
Be very serious about taking care of your health to minimize the odds that you'll eventually need long-term care.
Buy an insurance product that will cover chronic illness or long-term care. If the premiums are too high for your budget, consider buying "catastrophic" insurance or a policy that will pay for some, but not all, of the potential expenses. Some insurance is better than none. Look for ways to reduce your premium costs. Insurance products costs less if you start the policy at an early age.
Maintain a reserve of savings that's dedicated to long-term care and won't be used for generating retirement income.
Keep your home equity in reserve for the day when you might need long-term care. At that time, you might take out a reverse mortgage or home equity loan. Keep your home debt-free, and don't take out a reverse mortgage to generate retirement income until you need it for long-term care.