By Brett Gottlieb
Retirement is something to look forward to, but one aspect of retiring and getting older that we don’t like to think about is the potential need for some form of long-term care. Research suggests that most Americans turning 65 will need at least some form of long-term care in their lifetimes, and the likelihood goes up the older you are. As you can imagine, long-term care is no small expense. If you haven’t already built long-term care costs into your retirement plan, you may want to begin planning for those costs sooner rather than later.
Keep in mind that the cost of long-term care depends on what type of care is needed and the location in which you receive long-term care services. According to the Genworth Cost of Care Survey, the national median costs of long-term care range from around $1,600 per month for adult day healthcare services to around $8,800 per month for a private room in a nursing home.
Unfortunately for Californians, our long-term care costs are above average (much like many other expenses), which means it’s even more important that you and your family prepare for the possibility of these significant costs.
Cost Of Long-Term Care In California
The following data shows average costs based on facilities all over California, so the actual costs of care may vary drastically in your specific location. Additionally, because some long-term care needs can be fulfilled by family and friends, these costs may not be necessary for all retirees depending on the support group of the person needing care.
On the other hand, some old-age illnesses such as Alzheimer’s will almost always result in the need for long-term care during the late stages of the disease, despite how supportive or available loved ones are to help.
No matter what, it’s worth considering the need for long-term care costs as part of your retirement plan. The following table shows the median cost of long-term care services in California:
|Type of Care||Monthly Median Cost in 2020|
|Adult Day Healthcare||$1,733|
|Homemaker Services and/or Home Health Aide||$5,529|
|Assisted Living Facility||$5,000|
|Nursing Home: Semi-Private Room||$9, 247|
|Nursing Home: Private Room||$11,437|
As you can see, costs in California are higher than costs in other areas of the United States and the expenses can be significant. Nursing home care, whether in a semi-private room or private room, may be well above most people’s monthly mortgage payments.
So how can you build these expenses into your retirement plan if you had planned on mitigating housing costs in the remaining years of your life?
Options To Pay For Long-Term Care
If thinking about paying for these costs on your own feels overwhelming, you have options. The three most common options include:
- A stand-alone long-term care insurance policy
- Addition of a long-term care rider to a life insurance policy
- Long-term care add-on to a fixed or indexed annuity
Stand-alone policies have been decreasing in popularity because the annual premiums can be quite expensive and the policies usually offer no cash benefit to survivors. Therefore, stand-alone policies may only be a good option for those who can afford the premiums and are relatively sure they’ll need long-term care coverage later in life.
Two alternative options might be to add long-term care insurance to existing contracts you own. If you have a permanent life insurance policy, many insurers offer an add-on called a long-term care rider. An optional rider is an extra feature designed to provide additional options above and beyond the standard provisions in life insurance, they may not be available in all states so be sure to check with a trusted professional. Life insurance riders may be available for an additional annual premium and may come with death benefits.
And if you own an annuity, you may be able to purchase a similar add-on, in which additional amounts would be added to your monthly annuity income if you ever need to pay for long-term care.
Partner With A Professional To Make The Right Decision
Long-term care expenses are costly as well as likely, so it’s best to incorporate them into your retirement plan so you aren’t surprised and caught unprepared down the road. And because everyone’s situation is unique, a variety of factors will go into determining how you plan for it. With all of the available options, it can get overwhelming quickly.
As with any major financial decision, partnering with a professional is a wise move. Instead of going at it alone, let our team at Comprehensive Advisor help you understand your options and make the best decision for you and your family. Email us at info@ComprehensiveAdvisor.com or call (760) 813-2125 to get started.
About Our Advisors
Brett Gottlieb is the founder of Comprehensive Advisor and a financial advisor with nearly two decades of industry experience. He graduated from California State University-Chico with two bachelor’s degrees in Business Administration and Economics. Brett is Life Insurance licensed in several states. He is passionate about guiding his clients on retirement income planning, helping each client pursue their specific retirement goals and defending the assets his clients have worked so hard to achieve. Brett is a California native and currently resides in San Elijo Hills with his beautiful wife and three children.
With a combined experience of over three decades in the financial services industry, our advisors hail from some of the largest independent broker/dealers and banking institutions in the country. They have dedicated their professional careers to creating personalized financial solutions for individuals and families who seek successful retirement planning and currently offer investment advisory services through AE Wealth Management, LLC. Our advisors take a common-sense approach to the planning process and work with clients to create a retirement road map to help ensure their assets are protected and they receive the income needed to enjoy their future. Based in Carlsbad, California, they work with clients throughout San Diego County and beyond. Learn more by connecting with Brett on LinkedIn or email them at info@ComprehensiveAdvisor.com.
Comprehensive Advisor, LLC is an independent financial services firm that utilizes a variety of investment and insurance products. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Comprehensive Advisor are not affiliated companies. C.A. Financial & Insurance Services, CA Ins. Lic. #6000262. This material is intended to provide general information and is believed to be reliable, but accuracy and completeness cannot be guaranteed. Neither the firm nor its representatives may give tax or legal advice. Investing involves risk, including the potential loss of principal. Any references to protection benefits, safety, security, lifetime income, etc. generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. 902565 – 5/2021
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