Around 70% of individuals aged 65 or older will eventually require some form of long-term care. Moreover, the proportion of the population aged 65 and older is expected to increase from 17.3% to 22% by 2040. Factor in the aftermath of the Covid-19 pandemic and the subsequent surge in inflation, particularly in essential goods and services, and we find ourselves in a scenario where healthcare professionals are stretched thin, and the cost of care is increasing. It’s evident that long-term care expenses are unlikely to decline in the near future.

The expenses associated with long-term care services differ based upon location and the specific type of care required, presenting significant financial challenges for many individuals. So, what’s the game plan? Conventional health insurance and Medicaid coverage have coverage limitations. On average, individuals spend about 3.2 years in long-term care facilities, with over 20% requiring care for 5 years or more. Relying solely on retirement savings without knowing how long you’ll require care is a risky proposition. While one might hope that family, particularly our children, might step up to take care of us, we are betting on them being financial stable enough and willing to take this responsibility on.

Long-term care insurance offers a means to shift the financial risk associated with long-term care to a third party. However, this avenue also presents its own set of challenges. Long-term care is typically purchased between the ages of 45 and 65, when individuals are generally in good health and financially stable, though long-term care insurance may not be financially feasible for everyone. These policies have exclusions and/or limitations. The cost and availability of Long-Term Care insurance depend on factors such as age, health, and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of Long-Term Care insurance. Guarantees are based on the claim paying ability of the insurance company. For those who find themselves unable to afford it or are beyond the age where insurance premiums are reasonably priced, exploring alternatives such as Medicaid or federal and state partnership programs might be necessary, though these programs have strict eligibility criteria.

There is no one-size-fits-all solution to long-term care planning, but it’s imperative to acknowledge the looming risk, diminishing resources, and escalating demand. If there’s even an ounce of concern regarding your ability to afford long-term care without imposing a significant financial burden on one’s family, seeking guidance from a financial advisor is strongly recommended. Being proactive in understanding available options can allow individuals to make well-informed decisions and determine the best plan of action.

https://www.hhs.texas.gov/services/aging/long-term-care#:~:text=People%20who%20are%20older%20and,term%20care%20during%20their%20lives

https://www.americashealthrankings.org/explore/measures/pct_65plus

https://www.aaltci.org/long-term-care-insurance/learning-center/probability-long-term-care.php