No one wants to worry about running out of money. So why are so many plans missing this?
Here’s a bit of trivia for you: What’s one of the biggest signs that you’ll run out of money in retirement? Chances are it’s not what you think. In fact, most retirement plans don’t even include it.
Ready for the answer?
One of the biggest signs that you might run out of money in retirement is not having a plan to pay for long-term care. In fact, the risk is so big that it topped a recent Yahoo News article on the topic, and with good reason. Long-term care—whether it’s in a nursing home, an assisted living facility, or at home—is pricey. According to LongTermCare.gov, the average cost of one year of care in a nursing home is $82,128 for a semi-private room and $92,376 for a private room. The average stay lasts 3 years. And while we all want to think we won’t need long-term care, unfortunately statistics show that 70% of us will.
As if those numbers weren’t daunting enough, the Federal Reserve’s most recent Survey of Consumer Finances found that the average household retirement savings for Americans between ages 65 to 74 is $426,070. Three years of long-term care costs for just one person would eat up a sizeable chunk of those savings. Worse, based on the figures above, it might not even cover the costs if a married couple both needed long-term care.
So, if not having a long-term care plan is such a problem, why do so many people go without?
There are a few reasons. First, there’s a common misconception that the only solutions are pricey long-term care insurance that most people don’t want to pay for, or self-funding, which is only feasible for less than 5% of retirees. Second, most traditional financial planners don’t understand long-term care laws or the gravity of the risk. That leaves their clients with no other option than to bury their heads in the sand and hope for the best. Finally, the third reason many people go without a plan to pay for long-term care is that they erroneously assume Medicare will pick up the tab. Unfortunately, neither assisted living or in-home long-term care are covered.
Thankfully, retirees have other options and long-term care experts who can help them navigate what’s available. Specialized retirement financial planners, like our team at Golden Reserve, are well-versed in the benefits available through programs like Medicaid, Passport, and the VA, so they can help you take advantage of everything you’re entitled to. They can also examine your life insurance policy to see if it allows for Accelerated Death Benefits. If so, you may be able to receive a tax-free advance on your life insurance death benefit while you’re still alive to help with the cost of long-term care. The cap is usually around 50% of the death benefit, with monthly benefits around 2% of the policy’s face value for nursing home care, and half that for in-home care.
Another excellent source of guidance in this area is an estate planning and elder care law attorney, who can advise on legal tools that will help you limit your risk. One such tool is an asset protection trust, which transfers ownership of a person’s assets and property to the trust, effectively shielding the estate from creditors. Many retirees could benefit from an asset protection trust, which is why we’ve partnered with our friends at AlerStallings to make it a benefit for clients who need one, at no additional cost.
No one likes to talk about the possibility of long-term care, and especially not the cost. At Golden Reserve, we make it painless. Our experienced retirement financial planners can ensure that you get the plan you need and the peace of mind you deserve. Set up a free no-obligation consultation today.