Protecting your nest egg

A look at one possible variable

Many of us spend years carefully working and planning for a comfortable retirement. We assume our retirement savings are protected to some extent; but unfortunately, there are uncontrollable and often unpredictable external variables at play, such as the rising cost of health care. Have you ever considered what may happen if you or your spouse required long-term care?

What is long-term care?

Long-term care is defined as services provided to anyone with a chronic disease, disability or sudden illness who requires assistance with Activities of Daily Living – known as ADLs. These activities include eating, bathing, dressing or moving from a bed to a chair. It also includes the super­vision of people with severe cogni­tive impairments, such as Alzheimer’s, or other mental illnesses that limit a person’s ability to think or reason.

Long-term care costs have soared in recent years, and continue to rise. The median annual cost for a private room in a nursing home is projected to increase from $87,600 to $129,669 in 10 year. The cost of long-term care services provided in your own home, at a community facility or in a nursing home generally is not covered by Medicare or other medical plans, and may significantly impact you and your family's financial resources.

Purchasing long-term care insurance can help mitigate this risk and help protect your retirement portfolios. By paying an annual premium, you can help transfer the financial risk of long-term care to an insurance company.

How does long-term care insurance work?

Long-term care insurance generally provides coverage for those who are unable to perform two or more ADLs for a period expected to last at least 90 days, or require substantial supervision due to severe cognitive impairment. Long-term care services can be received at home, in an assisted living or community facility, or in a nursing home as long as it is provided in accordance with a plan of care prescribed by a licensed health care practitioner. A long-term care insurance policy typically offers the flexibility to choose where and how you receive care. The cost of the policy is typically a function of your age, health and amount of coverage.

With some thoughtful preparation, you can help protect your savings against the potential risk of long-term care expenses, enabling you to enjoy the retirement you have dreamed of.

Categories: Finance