We’ve all heard that people are living longer than ever before. The average life expectancy for males is 84 and for females is 86. But 1 in 4 will live past the age of 90 and 1 in 10 will live past 95. Based on these numbers, your retirement could easily last 30 years instead of 20. (1) As a result, your retirement planning and insurance needs can evolve and you may need more than previously anticipated.
On top of rising life expectancy rates, Alzheimer’s disease deaths are also rising. According to the CDC’s (Center for Disease Control) recent Morbidity and Mortality Weekly Report, deaths from the disease have surged 55% from 1999 to 2014, as seen in the chart below. The CDC also forecasts that the rate will quadruple by 2050. (2)
Alzheimer’s disease, a lethal form of dementia, is quickly becoming a costly major disease as sufferers require ongoing medical care. Some have coined this growing population of Alzheimer’s sufferers as the Zombie Apocalypse due to the anger and violence that the disease can cause in some.
Alzheimer’s and dementia costs range as high as $215 billion annually in the U.S. and more than two-thirds of this amount is anticipated to be covered by Medicare and Medicaid. If this problem isn’t addressed, these costs may decimate healthcare budgets. (3)
Affording Medical Care
A serious question to ask yourself is, “how will I afford extended medical care and treatment should I need it due to a serious illness like Alzheimer’s?” While public programs like Medicare may cover your doctor appointments or medication, they won’t cover skilled nursing care or the kind of long-term care that most elderly need to maintain their independence.
If insurance doesn’t cover long-term care, then the costs will come straight out of your pocket. The most basic kind of care, homemaker services, runs about $3,800 a month on average. The most expensive care, a private room in a skilled nursing facility, averages about $7,700 a month. These are national averages and costs vary greatly depending on the state and county you live in. You can look up the 2016 average costs for your area here.
Weighing Your Insurance Options
If your nest egg won’t be able to withstand the costs of long-term care, what can you do? Since most people can’t afford to self-insure, it’s important to plan ahead. There are a few ways to gain long-term care coverage, and it is important to understand them in order to choose the best fit for your particular situation.
One option is traditional long-term care insurance where you pay a premium in exchange for the ability to receive benefits if they are needed. A long-term care insurance policy provides you with money to pay for qualified long-term care costs if they are incurred. If you never need long-term care, then you receive no benefits; it is a “use-it-or-lose-it” policy. When you purchase your policy, you choose the level of insurance you want. You select the daily benefit amount for care in a nursing home and whether you need home care coverage as well.
With a traditional long-term care policy, people sometimes feel that if they buy it and don’t use it, they have wasted their money. One very popular solution and alternative to this is a life insurance policy with a long-term care rider. This way, if long-term care is needed, there are available funds, and if not, it isn’t wasted because it is passed on to the heirs as a life insurance benefit.
In this case, you invest in a typical cash value life insurance policy and select your long-term care coverage terms in the rider. If you end up needing long-term care coverage, it comes out of your policy’s death benefit. If you don’t spend the total benefit available, your beneficiaries will receive the balance upon your death.
How We Can Help
Whether you’re worried about potential health concerns like Alzheimer’s or want to protect your hard-earned wealth during your retirement years, it’s important to understand the life and long-term care insurance options available to you and whether a policy makes sense for your lifestyle and needs. While some policies can be expensive, requiring long-term care without insurance in place can be devastating.
At Haydel, Biel & Associates, we can help review your current insurance policies and retirement income plan to make sure you have the coverage you need. Contact me at (626) 529-8347 or email me directly at [email protected]. I’m happy to answer any questions you have and ensure you’re aware of your insurance options.
Ricky Biel, CRPC® is a wealth manager with Haydel, Biel & Associates, an independent financial advisory firm serving individuals and families near Pasadena, California. The firm was founded in 2004 by Chris Haydel and Ricky Biel with a desire to provide unbiased, client-centered, community-based financial advice. Together, they have built a practice that has grown into a family of caring, smart professionals committed to blending proven investment methodologies with creative financial technologies that make it easier than ever to accomplish your goals. They strive to keep things simple and fun to give their clients peace of mind and alleviate financial stress. HBA Wealth takes care of their clients’ needs first and foremost and goes the extra mile to make their clients’ finances grow. To meet and see how the HBA Wealth team may be able to help, contact them today at (626) 529-8347 or email Ricky directly at [email protected].