Long-Term Care: The Blind Spot of Retirement Planning

Let’s talk about the blind spot of retirement planning, the possible need for extended, long-term healthcare. By definition, long-term care means you need custodial care, which means you require care because you can’t live independently for 90 days or more. Planning for these potential healthcare needs, such as dementia or Alzheimer’s disease, are a vital part of a financial plan.

Thinking about Long-Term Care

The average nursing home in East Tennessee costs about $80,000 a year, while assisted living can easily run from $45,000 up to $60,000. Those costs are going up at a rate of about five to six percent a year. If you’re retired and a nursing home costs $80,000 now, in 20 years when you are more likely to need long-term care in a facility, the costs might rise to $200,000 a year. Seven out of 10 people in their 60s are going to need some form of long-term care. That means, if you are married then there is about a 50-50 chance both of you are going to need long-term healthcare.

Also, when we have someone who needs long-term care, it’s not just your life that changes, but also the life of a loved one. That’s why it’s important to make sure your financial planning allocates resources for long-term care. That way, your spouse, children or other loved ones can simply supervise your care instead of providing it.

Develop a Plan

The last thing people want is to be a burden on their kids. Having the resources in place in your financial plan mitigates that possibility. The good news is there are a lot of ways to do that.

A lot of people are self-funding their long-term care, and that’s a legitimate strategy as long as you understand the costs and probabilities. The better news is there are also some very effective forms of inuring this risk outside of the traditional method of long-term care insurance. One of the problems with traditional insurance is that we don’t know what it’s going to cost in the future. Your premium is probably going to increase dramatically if they haven’t already. There are other types of insurance where you own your insurance, and it is an asset on your balance sheet. It’s guaranteed to pay off in some form or fashion, and they can’t increase your cost. These ownership types of plans are an effective way to plan for the risk of long-term care, if you can afford it, because when you allocate for this need in your financial plan, you are removing those funds from income-producing assets.

When you are creating a financial plan, you need to be considering what your need for income is; how to invest your money properly; and how to tax, estate and healthcare plan. If you need help developing a financial plan, we are happy to help. Call Brogan Financial at 865-862-6800. We can help you plan for this blind spot of retirement planning and make sure you have the resources so that the devastating thing that might happen in your life doesn’t also change your loved ones’ lives forever.