First the good news: Thanks to better health care, life spans are increasing. You’re more likely to live a long, healthy life. This could mean ten, twenty, or even thirty years of retirement!
Now the not-so-good news: As we age, we’re more susceptible to injuries and illnesses that can necessitate long-term nursing care. That doesn’t mean you will languish in a nursing home for years; often seniors need long-term care for a period of a few months before they’re back on their feet. But it does mean you could incur a large expense as you age, and Medicare often does not cover this type of nursing care until you have depleted your own savings.
In the past, the task of providing nursing care usually fell upon younger family members. But with a wider gap between the generations nowadays, your adult children may be busy tending to their own, very young children when that time arrives. The task also tended to fall on female family members, as part of their roles as homemakers, but these days your adult daughter or granddaughter is likely to have a career of her own. In short, counting upon family members to provide full-time nursing care is probably not a great idea.
With the median cost of a nursing home reaching $87,000 per year (on a national level; numbers vary between states), it’s easy to see that a single accident or illness could eat a large hole in your retirement savings. Even if you recover from your health condition and are able to return home, you could then face the possibility of outliving your money.
A long-term care insurance policy can solve this problem, but make sure to consider two things: How much coverage do you need, and when should your purchase your coverage?
Long term care benefits are usually paid on daily or a monthly basis. For example, your benefits might cover 200 dollars per day or 6,000 dollars per month. If paying a home health aide or nursing home exceeds those costs, the balance will still fall upon you. Consider the average cost of nursing care in your area before deciding upon an amount of coverage.
Also, long term care insurance premiums depend partly upon your age at purchasing the policy. If you purchase the policy at age 55, your premiums will be significantly lower than if you wait until age 65 to enroll. Of course, this is because you’re less likely to need long-term nursing care when you are younger. In general, it is best to purchase your policy in your late fifties, before you retire.
As you plan for retirement, remember to calculate the possible cost of long term nursing care. Talk to your financial advisor or insurance broker about your options, so that you can make a plan to cover this expense without sacrificing your savings.