“What’s My Plan if I Become Old and Feeble?”

This is a question that nearly all of us should be asking ourselves but in many cases fail to do. Even with the Covid-19 pandemic continuing to rage throughout the world, life expectancies are still increasing. Advances in nutrition and modern medicine are seeming to accelerate, and it’s clear that this trend toward longer lifespans will continue for the foreseeable future. 

Now living a long life is not a bad thing, but those additional years must be somehow funded. It’s been well established that many are short of the resources needed to maintain their living standard after leaving the workforce. However, the gap is even larger when one considers the need for additional care at very advanced ages. Traditionally, this focus was on nursing homes but fortunately, our society is developing a myriad of additional solutions besides senior health care institutions.Most Americans prefer to “age in place” and the senior care industry is well aware of this desire. 

The projections and statistics are a bit sobering. It’s estimated that more than 40% of Americans over age 85 have Alzheimer’s disease and 70% of 65 year-olds are projected to need a form of long term care at some point.¹  There’s clearly no “one-size-fits-all” solution but putting our collective heads in the sand and ignoring the potential issue is probably the worst of the choices. 

Many people hold to the mistaken belief that Medicare covers these expenses. However, this is only true for very short periods of time and must be part of a recovery plan from a recent hospitalization. Long term care insurance is probably the preferred solution for most, but many lament that these insurance plans are expensive. Likewise, people balk at the “use-it-or-lose it” nature of pure long term care insurance policies. For these reasons, fewer than 10% of American seniors own such plans which leaves our society with an enormous shortfall. 

Absent some future governmental intervention, the majority of Americans will be forced to “self- fund” the needed care, at least until their resources are exhausted. Medicaid will eventually step in, but this requires the recipient to have exhausted their personal resources which can be devastating for a still healthy, surviving spouse. Just the same, Medicaid covers more than 50% of the costs of caring for America’s disabled and elderly with private insurance contributing only about 11%.¹

The best action for most of us is to at least initiate the steps to develop a plan rather than hope it never becomes an issue. Financial planners are a good resource as they can factor the need for a long-term care plan into a comprehensive financial plan that also incorporates other financial goals such as retirement, college costs for children and estate planning. Planners are also likely to be more aware of recent industry developments, such as hybrid life insurance policies that address the “use-it-or lose-it” aspects of traditional long term care insurance policies.

If you would like to learn more about these and other wise financial planning moves, please contact us through our Level 5 Financial LLC website or via phone at 719-323-1240.  This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice.  You should consult your own tax, legal and accounting advisors before engaging in any transaction.

¹ ”Who will pay for Long-Term Care?”, Allison Schrager, Financial Advisor magazine, November 1, 2021.