This Thanksgiving holiday, as multi generations of my family gather together, I can’t help but reflect on the lifetime of love and support my parents have provided to me and my children. I’m also very aware of their own special issues. Did you know, a person who turns 65 today has a 70% chance of needing some type of long-term care at some time in their remaining years? That’s according to the U.S. Department of Health and Human Services and on average, women will need 3.7 years of long-term care while men will need 2.2 years of care. Only 20%, however, will need care for longer than five years.
If you or your parents don’t have the financial resources to pay for this long-term care – either through a nursing home stay or in-home care – you should consider long-term care insurance to fill the void. And while annual premiums will vary according to your age and health status, they can all be fairly expensive.
Here are some tips to reduce the cost of long-term care insurance:
Buy young. Since premiums rise as you age, purchasing a long-term care policy when you are younger can mean cheaper premiums. Just be sure you are aware that premiums can increase as you age, so be sure to discuss this with your insurer.
Shorten the benefit period. Lifetime policies are the most expensive, and since statistics show that most of us will not need long-term care for more than five years, you can save thousands of dollars in premiums if you buy a short-term policy.
Lengthen the elimination period. Most policies have a 30-90 day waiting period before coverage begins. If you can make this period longer, your premiums will be cheaper.
Reduce daily benefits. If you can pay for some of your long-term care needs yourself, you can reduce the daily benefit amount on your policy, which will result in lower premiums.
Share the care. If you are married and both of you are buying long-term care insurance, a shared care policy could provide you both with more coverage for less money. A shared care policy provides a pool of benefits that are shared between you and your spouse, so if you buy a 5-year shared care policy, the two of you would have 10 years of benefits. If your spouse only uses 3 years, you would have 7 years of benefits to use.
Take the deduction. Your long-term care insurance premiums may be deductible. If they meet the requirements for “qualified” long-term care expenses, they can be deductible, with the amount depending on your age and tax year. For 2014, the long-term care premium deductibility limits are $1,400 for those more than 50 but not more than 60, $3,720 for those more than 60 but not more than 70, and $4,660 for those over 70.
To learn more about long-term financial planning for your – or your parent’s – golden years, give me a call and let’s chat over a cup of coffee.