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This newsletter article provides an overview of long term care. It is the first in a 2 part series concerning a topic that plays an important role in the financial planning process.

Long Term Care – Aging with Dignity

By Nicolas Valdes-Fauli, CFP®

According to National Clearing House for Long Term Care roughly 70% of all people over the age of 65 will require some form of long term care (LTC) services in their lifetime. Given these odds, it is reasonable to assume that you may need these services in the future and to plan accordingly. However, all too often, people assume that they will not need this type of care and when the need arises their resources for LTC can be very limited.

Without proper planning, the burden of long term care can drain a person’s financial resources as well as the resources of other family members. It can also be very difficult for a care giver to manage an elderly person’s well-being without compromising their own personal life (job/income, family, etc.). In the worst case scenario, you may not be able to have the care you want or need or to live under the conditions you desire.

Let’s begin by looking further at the basic concept of LTC.

What is Long Term Care (LTC)?

LTC is a range of professional or paraprofessional services and/or durable medical equipment/assistive devices that providesboth a network of support and the tools needed to assist you in maximizing your activities of daily living over a long period of time. In its most basic form, LTC includes things like assistance with bathing, dressing, feedingand mobility. Other aspects can include housekeeping, household shopping and meal preparation, administering medications, managing finances and caring for pets. Essentially, long term care allows individuals to access the necessary support to maintain their maximum functional capacity in a variety of settings including their own home, assisted living communities or skilled nursing facilities.

Planning for Long Term Care

There are many factors that need to be considered when planning for long term care. Major considerations include desired living arrangements as well as other personal factors. Aspects to consider include:

• Current age – The cost of obtaining a long term care policy increases with age.
  
  
• Family history – How long did your parents and grandparents live? This is typically a good indicator of familial life expectancy.
  
  
• Gender – Women live longer than men and are more likely to live alone at home without assistance.
  
  
• Current Health – People with a chronic condition are much more likely to develop a long term disability and are more difficult to insure with long term care coverage.
  
  
• Financial Resources – What are your savings and other financial obligations?
  
  
• Housing – Can your home accommodate a person with disabilities? Would you prefer to continue living in your home or would you prefer an assisted living environment?

Paying for Long Term Care

One of the most important things to know when considering whether to purchase a long term care policy is that Medicare does not pay for long term care unless the person’s condition is going to improve and even then, Medicare only pays for the first 100 days (after 100 days, you are on your own).

This means that you will need to rely on one of four sources to get care: a family member, your personal resources, a LTC policy and/or a life insurance /annuity with a LTC rider to pay for long term care expenses. According to the Official Site for the U.S. Government for Medicare, roughly 70% of the sole care givers for the elderly are family and friends. The implications of caring for an elderly person can be a serious burden on a person or a family. It is important to remember that as your daily care needs increase you will probably need the added assistance of a professional or other individual to provide respite to caregiving family members.

To better understand the cost of long term care let’s look at the average annual LTC costs in the United States for 2010.

As you can see the costs for providing basic living assistance for the elderly can be very expensive and these costs are expected to rise annually as LTC costs have exceeded the overall rate of inflation.It is also important to consider geography as these costs are higher in places with a higher cost of living such as New York City.

While we can hope that none of you require these services in the future, the reality is that you or a family member very well may need this type of care. As financial planning professionals we feel it is very important that each and every one of our clients consider the merits of purchasing a long term care policy for themselves or for a loved one. While purchasing a policy may not be right for everyone, it is also critical to think about how these expenses would be managed in the absence of LTC coverage and to plan accordingly.

Should you wish to set an appointment to review your current situation or that of a family member please feel free to reach out to us. We can help you identify your needs, costs and whether or not a LTC policy is right for your situation.

Later this month, we will discuss Long-Term Care solutions in greater detail.

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