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LTC Planning Guide
Step 1: What is your Destination
Step 2: How will I Get There?
Step 3: When is the Best Time to Travel?

 

 

 

 
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Pay as you go

Using personal funds to cover long-term care gives you a lot of choice and flexibility. By taking on the full risk of long-term care expenses, you or your family control how the money will be spent. If you never need care, you can leave the remaining estate to your heirs.

You will need to carefully review your financial situation before you decide that you can pay for long-term care on your own. Married couples must make sure that there will be adequate funds to maintain the lifestyle of the well spouse, along with any other dependents.

SAVINGS AND ASSETS
Saving just for long-term care isn’t a bad idea for wealthy people or for young, dedicated savers who like to plan ahead. But you have to be sure that you save enough to cover long-term care costs, along with the everyday expenses associated with retirement. Also keep in mind that the value of investments can fluctuate over time.

Take this quick quiz to estimate of what you need to save to pay for long-term care:

Enter your age:
Enter the number of years until you think you will need LTC:
(or years until age 85)
Enter the amount you can set aside monthly for LTC: $
Enter the annual rate of return you expect on your monthly savings:(e.g., 4%, 7%, etc.) %
RESULTS:
Total savings until you need care $ in years.
Cost of LTC* in years: $ (adjusted for inflation at 5%)
Gap between projected savings and cost of LTC: $

*Cost of about 3 years of home care, or about 2 years of assisted living, or one year in a nursing home.

Unexpected long-term care costs can disrupt long-term investment plans. It is important to set aside some cash or other readily available funds to pay for these expenses. You could face substantial penalties if you had to withdraw certain funds prematurely to pay for assistance. In addition, you may need to pay taxes when you liquidate assets.

HOME EQUITY
The equity you have in your home can be an important source of cash. A reverse mortgage is a special loan available to homeowners 62 and older that enables them to borrow against the equity in their home. The proceeds can be used for any purpose, and taken out as a line of credit, lump sum payment, fixed monthly payment (for up to life), or a combination. The borrower continues to own the home during the life of the reverse mortgage, but doesn’t make monthly mortgage payments. The loan comes due when the borrower no longer occupies their home as a principal residence. The repayment amount can never exceed the value of the home. To get more details about reverse mortgages, check out the AARP website.

ANNUITIES
If you already need long-term care, an immediate annuity can help make sure that there will be a stream of income to pay on-going expenses. In exchange for a lump-sum payment, an insurance company will promise to pay you monthly payments, which is called an annuity. The period over which you receive payments may extend for a specified number of years, or for the rest of your life. In this way, an annuity can make sure that you don’t outlive the money you have set aside for long-term care.

OTHER OPTIONS
People who have a life-threatening illness may be able to sell their life insurance policy for cash.

Elders who need additional income can rent a portion of their home.

An aging parent can move in with a child or other family caregiver. The family home will need to be modified to make sure the elder feels safe and is secure. Families may also consider building an addition or a guest house to support elders who are not able to live completely alone.

Out-of-pocket payments for long-term care may be deductible as a medical expense from your federal income taxes.

 

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