The good news: We are living longer. The bad news: That often means increased long-term care costs, as the costs add up over the years.
In fact, it said Washington Post photo Michelle Singletary in a recent piece, many older people now “seem less afraid of dying than living so long that they will eventually need help with basic tasks, such as preparing meals, shower and dress.” This is because “they are worried that they will not have enough money to cover these expenses.” And it’s a far from irrational concern, like Genworth’s 2023 Care Cost Surveythe average annual cost of a private room in a nursing home is $116,800,” he said. Kiplinger.
However, “the earlier you start planning, the more control you have over your future,” the center added. Here are some ways you can turn to cover these costs.
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Long-term care insurance
One option to pay for care-related expenses is long-term care insurance, which “usually pays for care if you have a chronic illness, dementia, or severe cognitive decline.” , or unable to do at least two of the six activities of daily living without help: bathing, defecation, dressing, eating, getting up or down. the toilet, or getting in or out of bed or a chair,” it said. NBC News.
This option is “one of the most direct,” and “can be used to cover a lot of costs,” he said. CBS News. However, it is necessary to qualify for coverage, “so the sooner you buy a policy, the better.” As you get older, you may have a pre-existing health condition that may disqualify you.
There are also costs to consider: “Premiums for a healthy 55-year-old woman can range from $1,500 to $7,000 a year, depending on benefits, depending on American Long Term Care Insurance Association“Said NBC News. For men, premiums are “generally lower,” as they typically “don’t live as long and are less likely to use benefits.”
Annual income
Annuities, which are effective contracts between a consumer and an insurance company that can provide a guaranteed amount, are another option for covering long-term care costs.
There are different types of annuities, but one option is an “income annuity that includes a provision to increase your payment if you need long-term care,” he said. Kiplinger. Although “the payment may not cover all the costs of care, and the additional costs of this arrangement, known as the rider, may reduce the normal payment from the year,” the retirees are still ” they can collect annuity payments while they’re alive regardless of whether they need long-term care.”
Another benefit is that it’s “easier to buy in advanced age” compared to traditional long-term care policies, Kiplinger said.
Life savings accounts
If you contributed to a health savings account (HSA) while you were working, those funds can be useful for long-term care expenses. HSAs “allow people with high-risk insurance plans to save pre-tax dollars for future medical expenses — even if the money isn’t used for years or decades in the future.” Care.comto quote Ralph Barringer, CFP, longtime certified financial advisor and financial planner at Northwestern Mutual.
HSA funds can be used for “any medical expenses approved by the IRS for you, a spouse, or a dependent,” such as “medical equipment, such as wheelchairs and walkers, as well and copays for the appointment,” said Care.com. Those who meet certain requirements may also be able to use HSA funds for things like nursing and medical services.
Proceeds from a reverse mortgage or home sale
If you “have a lot of home equity,” a reverse mortgage may allow you to “cash out.” [your] CBS News said: “Unlike other types of home equity loans, a reverse mortgage loan does not have to be repaid until the home is sold” or you die. “Mortgage loans have been criticized for their high closing costs and high interest rates,” said Care.com.
You can also consider selling your home and using the proceeds to help pay for maintenance costs. Of course, this involves giving up your home, so it may only be a good option if you “feel comfortable with the idea of moving into a care facility rather than receiving care at home,” Kiplinger said.
