Today, I'm going to discuss long-term care as part of your overall retirement plan since it usually funds end of life care. I've found that retirees' main concern isn't necessarily outliving their savings – it's how they'll pay for health-related expenses.
When it comes to long-term care in retirement, we need to prepare for the worst while hoping for the best.
Here are the three questions you need to ask yourself when it comes to long-term care.
1. Do I have a plan?
Is this is a topic you have addressed? If you're ahead of the game, you'll already have a plan, even if it's a loose outline. Periodically revisit that plan.
For those who don't have a plan, create something and put it in writing. Read on for the issues your plan should address.
2. Where do I want to live in the case of extended care?
If you require extended care, you can go into a facility or receive care at home. According to Morningstar, 78 percent of people choose to have their care administered at home by a loved one.
There are costs associated with going into a facility. The national average for a semiprivate room at a nursing home is $73,000 per year, according to Morningstar.
At an assisted living facility, the cost of room and board is about $41,000 per year.
The reason for the discrepancy between the two is that most nursing homes are required to have a trained staff.
3. Who will pay for my care?
There are four ways to pay for long-term care.
First, the care ends up being provided by a loved one. While there is little financial cost, there can be an emotional burden of having a loved one provide the necessary care.
The second way is to pay out of pocket. Some individuals basically have to utilize their assets.
Another option to pay for long-term care is Medicaid, which only covers care administered at a Medicaid-certified nursing home – not in-home care or assisted living. Also, Medicaid will not kick in until a person's assets are spent down to roughly $1,500.
Finally, you can purchase a product through a professional. When meeting with someone, find someone who asks a lot of questions. In turn, be sure to ask questions about the product, which should be tailored to your needs. If you feel like you're being sold something off the shelf, you should be concerned.
After you've answered those questions and have put together a plan, have a conversation with your loved ones. Prepare to have an emotional discussion, but this conversation will benefit everyone down the road.
You don't want to put the responsibility and burden on loved ones to decide your wishes when you can be the one to dictate them now.