As Andy Rooney noted, “It’s paradoxical that the idea of living a long life appeals to everyone, but the idea of getting old doesn’t appeal to anyone.”
As medical science improves, people with chronic conditions and disabilities are living longer. You might be hoping that the script for your later years will read “healthy-healthy-healthy-dead.” But the statistics tell a different story. More than 80% of us will require some form of care in our later years, according to a new study from the Center for Retirement Research.
Fortunately, there is a new breed of life insurance policies that offer long-term care solutions. They can help you pay for almost any type of care, whether informal care delivered at home by friends or loved ones, or more specialized full-time support. We’re living longer than past generations, but that doesn’t mean we’ll be skiing the slopes of Telluride in our 90s.
Despite the shocking statistics about the likelihood that you’ll need long term care and the staggering costs associated with that, the vast majority of people don’t have a plan in place and severely underestimate the costs of a long-term illness. They assume Medicare will cover it (it won’t), or they put off even thinking about it until it’s too late and they’re in the middle of a health crisis.
The result? Here’s a typical scenario:
A Crisis No One Saw Coming
Gina’s father, Ray, was diagnosed with dementia, dramatically changing the family’s life overnight. The emotional and financial strain of arranging and paying for his care quickly became overwhelming.
Ray deteriorated rapidly, and the family had to hire a caregiver to work 60 hours a week. Ray had worked hard all his life and saved up for retirement. However, the cost of bringing in a caregiver quickly depleted his funds, and his savings were depleted in less than two years.
So, Gina and the family pitched in to provide care. It took an immense toll on the family financially, physically, and emotionally. And by the time Ray passed away two years later, Gina’s health was shot, and she had lost her job.
Did Ray mean to put such a burden on his family? Of course not. But just like too many others, he had neglected to plan for the strong probability that he would need long-term care at some point.
The Hidden Cost of Long-Term Care
Is the story of Ray and his family unique? Unfortunately, no. According to a study by the Bureau of Labor Statistics:
- 37.1 million people provided unpaid eldercare in 2021-2022
- 28% of Americans engaged in unpaid eldercare on a given day, spending an average of 3.6 hours providing this care
- Unpaid providers age 65 and older spent almost 5 hours a day caring for an elder
- 59% of family caregivers are women, often forced to leave the workforce or reduce their work hours
- Nearly half of eldercare providers provided care at least several times a week, and almost one-quarter provided care daily
What would happen if you or someone in your family needed long-term care? How would your family cope? Could they upend their lives to provide care? Would you tap your retirement savings to try to pay for the care you need? If so, let me warn you that the average cost of paying others to provide long-term care is eye-popping, according to a 2023 Cost of Care Survey:
- $124,256 per year for a private room in a nursing facility
- $109,200 per year for in-home care (60 hours per week)
- $79,015 per year for an assisted living facility
Of course, like everything else, long-term care costs are projected to rise and have been increasing at a rate faster than inflation.
According to 2022 research commissioned by the Department of Health and Human Services, about one in five adults (22 percent) will need care for more than five years. So, let’s do the math:
Today, baby boomers have an estimated median retirement savings of just $194,000. That would cover just one and a half years of long-term care, leaving nothing for anything else.
Even with the recommended retirement savings of $1 million for workers making $100,000, long-term care costs can quickly drain that money. Studies show that if someone without a long-term care plan suddenly needs care, their annual withdrawal rate from their retirement savings can jump from 5% to 11%! Even $1 million in savings could be cut in half within five years.
Unsurprisingly, 99% of Americans agree that having a long-term care plan would make things easier for their family. The long-term care solution I’ll tell you about now protects your retirement savings, takes the burden off your family, and has more benefits than traditional long-term care plans. It’s not your parents or grandparents’ long-term care plan!
A Smarter, More Flexible Long Term Care Solution
This strategy allows you to:
- Preserve your retirement savings instead of using them for care
- Maintain control over where and how you receive care—at home, in an assisted living facility, or elsewhere
- Access tax-efficient funds when care is needed
- Provide financial security for your family, ensuring they aren’t left struggling with tough decisions
Unlike traditional long-term care insurance, the life insurance-based solutions offered by Bank On Yourself Professionals are flexible options for people between the ages of 40 and 80:
If you need care:
- Some policies allow you to access benefits tax-free to pay for long-term care expenses, whether you need home care, assisted living, or a skilled nursing facility.
- Certain plans allow family members or friends to receive compensation for providing informal care at home, giving you more flexibility in choosing who supports you.
If you never need care:
- Your family can receive a tax-free death benefit, ensuring your hard-earned money isn’t wasted.
- Unlike traditional long-term care insurance, where unused premiums are lost, these solutions allow you to leave a financial legacy.
If your needs change:
- Some options offer a return of a portion—or even all—of your paid premiums, giving you flexibility if your needs change.
- Certain plans also have options for cash value growth, providing another financial advantage.
Other Benefits Available:
- No waiting period – Some solutions offer a 0-day elimination period, meaning benefits can begin immediately (most long-term care policies require you to pay out-of-pocket for at least 90 days).
- Joint coverage – Some plans offer joint protection, meaning a couple can share a single policy instead of buying two separate ones and even receive a couple’s discount.
How Will You Pay for Long Term Care Coverage?
Some plans allow you to fund your long-term care solution with either a one-time or annual premium. You could fund one of these policies with retirement dollars from an existing 401(k), 403(b), traditional IRA, or another qualified account. You can also transfer cash from an existing life insurance policy or a non-qualified annuity.
As the saying goes, “The best time to plant a tree was 20 years ago. The second-best time is today.” If you don’t yet have a long-term care plan in place, don’t just throw up your hands thinking it’s too late. Plans are available for individuals aged 40 to 80. You can set yourself up so that you don’t deplete your savings or become a burden to your family. Start by asking yourself these questions before a crisis happens:
- Who will provide care if you need it?
- Where would you prefer to receive care?
- How will you pay for it?
Since we all have different circumstances and needs, I encourage you to consult with a Bank On Yourself Professional who can help you find the long-term care solution that’s right for you and guide you to the best policy for your specific situation.
Request a free, no-obligation Analysis and Recommendations, and a referral to a Bank On Yourself Professional here:
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