Check Your Blind Spots When Planning for Retirement

Visions of life in retirement may include days filled with travel, recreation, relaxation, and pursuing lifelong passions. Those who have been diligently saving and planning for these days may feel confident in their ability to achieve their dream retirement. But, many retirees are not adequately prepared for what comes later when long-term care becomes a reality. With people living longer on average, the necessity for long-term care is likely. Long-term care can be costly and emotionally taxing whether it’s for in-home aid, an assisted-living facility, or a nursing home. While it is not cheerful or exciting to think about this part of retirement, long-term care should not slip into the rear-view. Here’s how to create a comprehensive retirement plan considering all life phases after 60. 

Understanding Long-term Care

Long-term care encompasses the services and equipment required to meet an individual’s health or personal care needs over an extended period. These services help people live independently and safely for as long as possible when they can no longer perform everyday activities. They range from basic personal assistance to more intensive medical and nursing care. Home modifications, driving and transportation alternatives, housekeeping, and home aides to help with bathing and mobility are all part of long-term care as are assisted living and nursing home accommodations. 

Importance of Planning for Long-Term Care

According to the U.S. Department of Health and Human Services, 7 out of 10 Americans will need long-term care. [1] For married couples, at least one of the two people will likely require extended care. Still, the Center for a Secure Retirement reports that only a third of middle-income boomers have a plan for long-term care. However, having a strategy for the final stages of life is essential for achieving the following goals:

  • Financial preparedness: Long-term care is expensive and continues to rise with inflation. Dependence on savings for the many out-of-pocket expenses associated with long-term care can rapidly deplete remaining financial stores. Additionally, withdrawing large amounts from traditional retirement accounts can significantly impact an individual’s taxes. Furthermore, outstanding long-term care costs can affect an individual’s estate plan after death. For instance, in Massachusetts federal and state Medicaid law requires MassHealth to recover assets from the estates of certain MassHealth members posthumously. This means that the proceeds from the sale of an individual’s home or assets from the member’s probate estate may need to reimburse the state for outstanding care costs rather than go to the intended beneficiary. [2] Saving for the inevitable will improve the chances of fully financing end-of-life care and retaining an individual’s estate plan.
  • Maintaining independence: Staying in control is important to most people as they reach the later stages of life. People want to remain independent as long as possible. With a plan in place, people can determine the care they want while still in a position to do so. 
  • Reducing family burden: Through advanced planning, individuals can relieve family members of the stress of making difficult decisions and ease the emotional burden on loved ones by outlining care preferences.

Steps to Planning for Long-Term Care

Evaluate needs: Individuals should consider health and family medical history including chronic conditions, lifestyle, and gender in their needs assessment. 

Explore care options: Individuals should familiarize themselves with different kinds of care, such as adult day care, in-home care, assisted living, and nursing homes and their services. 

Calculate costs: Individuals should research the costs associated with each care option.

Consider long-term care insurance: Individuals should consider insurance and evaluate different policies. It’s important to compare options and understand what is covered as policies vary. Long-term care insurance can help cover the costs of services not covered by regular health insurance or Medicare. Purchasing a policy at a younger age can be more cost-effective.

Create a financial plan: Individuals should work with a financial advisor to develop a comprehensive plan that includes long-term care and considers assets, income, and other resources. 

Make legal preparations: Individuals should establish a durable power of attorney, health care proxy, and living will and prepare appropriate legal documents. This will ensure a dedicated representative will make financial and healthcare decisions on an individual’s behalf if they are deemed incapacitated or incapable.

Discuss with family: Individuals should discuss their plans with family members. This ensures a collaborative approach to care planning and that all parties are on the same page.

Financing for Long-Term Care

Research shows that most Americans underestimate the expense of long-term care. A Genworth Financial survey from 2023 reported that the annual national median cost of a private room in a nursing home is $116,800 and $75,500 for a home health aide. [3] The Federal Reserve estimates that the average median household has approximately $185,000 in retirement savings between 55 and 64, one-fourth of what most financial experts recommend.

A person’s economic situation and required services dictate their long-term care payment solutions. Government programs like Medicare, Medicaid, and Veterans Benefits, traditional long-term care insurance, personal savings, or a combination of these are the most common financing methods for long-term care. Importantly, the only form of payment that will cover the cost of every possible scenario is personal savings.

According to the Department of Health and Human Services, Medicare will only pay for skilled nursing home care after a qualifying hospital stay for a maximum of 100 days. It does not cover extended long-term care.

Medicaid subsidizes long-term care for people with income and assets below a certain level or who first spend their savings. It requires a verified “lookback” process that confirms applicants haven’t transferred their holdings within five years.

Long-term care insurance also does not pay all the costs associated with long-term care. Individuals should know what their financial responsibility is versus what their policy covers. Long-term care coverage typically costs between $2000 and $5,000 a year, according to the American Association for Long-Term Care Insurance. Fewer and fewer people can afford to be a policyholder. 

Obtaining long-term care is a process. It requires careful navigation of the healthcare system, preparation of legal documents, and a financial plan. These things can take time to orchestrate. Starting early where possible and identifying the key resources upfront will only help. At SHP Financial, we take long-term care costs into account when creating a retirement plan for our clients. Don’t wait until long-term care is necessary to figure out how to pay for it, click here to schedule your no-cost, no-obligation financial review today.








The content presented is for informational purposes only and is not intended as offering financial, tax, or legal advice, and should not be considered a solicitation for the purchase or sale of any security. Some of the informational content presented was prepared and provided by tMedia, LLC, while other content presented may be from outside sources believed to be providing accurate information. Regardless of source no representations or warranties as to the completeness or accuracy of any information presented is implied. tMedia, LLC is not affiliated with the Advisor, Advisor’s RIA, Broker-Dealer, or any state or SEC registered investment advisory firm. Before making any decisions you should consult a tax or legal professional to discuss your personal situation.Investment Advisory Services are offered through SHP Wealth Management LLC., an SEC registered investment advisor. Insurance sales are offered through SHP Financial, LLC. These are separate entities, Matthew Chapman Peck, CFP®, CIMA®, Derek Louis Gregoire, and Keith Winslow Ellis Jr. are independent licensed insurance agents, and Owners/Partners of an insurance agency, SHP Financial, LLC.. In addition, other supervised persons of SHP Wealth Management, LLC. are independent licensed insurance agents of SHP Financial, LLC. No statements made shall constitute tax, legal or accounting advice. You should consult your own legal or tax professional before investing. Both SHP Wealth Management, LLC. and SHP Financial, LLC. will offer clients advice and/or products from each entity. No client is under any obligation to purchase any insurance product.
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