Long-Term Care Planning

Types of long-term care and where care is provided

Long-term care includes a variety of medical and personal care services provided in the individual’s home, a community setting or a residential care facility. Services generally fall into two categories: medical care and custodial care.

Medical care involves services provided by a health care professional, including a doctor, nurse or therapist. Custodial care, on the other hand, focuses on activities of daily living (ADLs) that an individual cannot perform independently, such as bathing, dressing, eating and mobility.

Long-term care types include:

• In-home care provided in the individual’s or a relative’s home.
• Assisted living for individuals who can no longer live independently but do not require nursing home care.
• Nursing homes offering a higher level of medical care.
• Adult day care with daytime supervision and limited medical care and therapy.
• Adult foster care in a caregiver’s home.
• Memory care for individuals with Alzheimer’s disease or another form of dementia.

How likely are you to need long-term care?

Your likelihood of needing long-term care depends on your age and individual circumstances, but about 60 percent of individuals will at some point require assistance with ADLs, according to the Administration of Community Living.

Historically, U.S. adults ages 65 and older have made up the majority of those needing long-term care, which presents a risk as individuals reach retirement and no longer receive regular income from an employer. There is no guarantee that someone will need long-term care or how long it will be needed, but planning for at least some care is prudent.

How long does long-term care last?

The length of care typically depends on the type of services received and individual needs. On average, women require care longer than men, about 3.7 years compared to 2.2 years. Only about 20 percent of individuals who need long-term care support will require it for more than five years.

Long-term care as a retirement risk

Long-term care and retirement go hand in hand. As a result, long-term care is often the missing piece in retirement planning, as many people do not account for the financial impact it may have. To reduce retirement risks tied to your withdrawal strategy, it is important to plan early and include long-term care in your overall retirement plan.

Financial risks of long-term care

A clear understanding of the financial risks associated with aging strengthens long-term planning and preserves more of what may be left to heirs. One of these risks is longevity risk, which is the possibility of outliving retirement savings. Inflation and rising health care and long-term care costs can erode purchasing power over time, place additional pressure on fixed-income sources, reduce available retirement income and create financial strain.

Long-term care expenses may extend to a surviving spouse, limiting their income stability and affecting their ability to maintain their desired standard of living.

How much does long-term care cost?

Costs vary based on location, type of care and level of support needed.

• Nursing home care is typically the most expensive due to medical and residential costs.
• Part-time care may be more moderate.
• Full-time or specialized care can be significantly more expensive than part-time care.

Home care costs have increased in recent years due to labor shortages, a growing aging population and regulatory demands. These trends are leading more families to take on caregiving responsibilities.

Long-term care insurance

One option when deciding how to pay for long-term care is to use long-term care insurance, which is designed to cover certain long-term care services that are not typically covered by traditional health insurance or Medicare. Depending on the policy, coverage may include in-home care, assisted living, adult day care, memory care or nursing home care.

Premiums generally depend on factors such as age, health and the amount of coverage selected. Purchasing coverage earlier in life may provide more options and lower costs than waiting until retirement or after a health issue arises. As with any financial decision, it is important to evaluate policy features, coverage limits and costs as part of your overall retirement strategy.

Paying for long-term care without insurance

Another option is self-funding, which involves using personal savings, investments or other assets to pay for care directly. However, using retirement savings to cover these expenses may affect other financial goals, such as maintaining a desired lifestyle, preserving assets for a spouse or leaving a legacy for family members. Both options involve trade-offs. It is important to weigh the potential financial impact of each and ensure decisions align with long-term financial goals.

What Medicaid and Medicare do, and do not, cover

A common misconception is that Medicare covers long-term care. Medicare does not pay for ongoing custodial care but does cover skilled care for a limited time under specific conditions. This coverage may include services such as rehabilitation or nursing care following a hospital stay.

Medicaid is the primary payer of long-term services across the United States. Medicaid long-term care coverage typically includes both medical needs and nonmedical support, such as assistance with ADLs, which distinguishes it from other programs.

Understanding the differences between these programs is an important part of planning for future care needs.

Caring for aging parents and family financial decisions

Many adult children take on caregiving roles for their parents at some point. That is why early family conversations about long-term care and planning for life without you are essential. These discussions support financial preparation and provide families with a clearer understanding of the realities of full-time caregiving.

Getting started with long-term care planning

Meeting with a financial advisor provides direction about planning for long-term care risks, evaluating funding options and incorporating care expenses into your retirement strategy.

Starting the financial planning process early is critical to reducing financial and emotional burdens later in life. The professionals at FNB provide guidance to evaluate long-term care considerations within the context of your broader retirement and financial plan.

First National Insurance agents can provide the expertise needed to navigate claims during periods of hardship. To connect with us and learn more, schedule an appointment or call 1-800-252-4850.