You may have spent years carefully working and planning so that you have sufficient income for a comfortable retirement.  You may think that your retirement savings are adequate; but have you ever considered what might happen if you or your spouse required long term care?

Studies show that one out of every two people over the age of 65 will need some form of long term care eventually.1  A year's stay in a nursing home can cost $100,000 or more,2 and the average duration of care is three years.3  So, you could face unplanned expenses of at least $300,000.

There is An Alternative

Could you afford extended long term care?  Even if you feel that you could, why take on that financial burden when there's an alternative to paying these expenses out of your own pocket?  Think about purchasing a long term care insurance policy—the annual premium may cost less than one month's stay in a nursing home.  Long Term Care Insurance can help you protect your assets and choose the type of care you want.

What About Medicare and Medicaid? 

You may think that if you ever need long term care, the costs will be covered by Medicare or Medicaid.  Therefore, there is no reason for you to have long term care insurance.   You probably don't know that Medicare will only pay 100% of the first 20 days of a long term care stay,4 and only if the facility is a Medicare-approved nursing home.  Since the average duration of long term care required by people over age 65 is a lot longer than 20 days (actually, it's 3 years3), Medicare probably won't suffice. 

What about Medicaid? Medicaid's nursing home and home care coverage is limited to people with low incomes and few assets.  To qualify for Medicaid you must be impoverished.   

Who should consider Long Term Care Insurance?

You can purchase long term care insurance for yourself or your parents.   Most people purchasing long term care for themselves are 55 or older with at least $200,000 in investable assets.  If you have elderly parents, you may wish to consider purchasing long term care insurance for them.

How to Choose a Suitable Plan

The cost of a plan—in terms of annual premiums—plays a large role in determining what type of long term care coverage is best for you.  A range of policies is available, designed to fit a wide variety of pocket books.  Comprehensive plans can provide coverage for 
nursing home care, at-home care, adult day care, and therapy services, paid companions, transportation services and professional advice on plans for care.  You can lower the premiums by selecting a more limited plan.  Your choice of the daily benefit amount, the benefit period and the "elimination" period, which is like a deductible, will also affect the cost of your plan.

Some companies offer inflation protection riders that increase your daily benefit amount.  The best inflation protection, especially for buyers in their sixties or under, increases the daily benefit amount by 5% a year, compounded annually.

Tax Benefits for Long Term Care Insurance

Tax laws consider premiums for qualified long term care policies a medical expense.  Therefore, if your nonreimbursed medical expenses, including your long term care premiums, exceed 7.5% of your adjusted gross income, you can deduct all or a portion of your premiums.  Benefits paid by long term care policies are not taxable as income.

Why Take an Unnecessary Risk?

Long term care insurance can be a valuable extension of your financial and retirement plans.  With long term care, you may be able to protect your assets, maintain your independence and preserve your standard of living. Why not safeguard your savings against the potential risk of long term care expenses so that you can enjoy the retirement you've planned for?

Salomon Smith Barney does not provide tax or legal advice.  Please consult your tax and/or legal advisor for such guidance.

© 2002 Joseph Hollak

Salomon Smith Barney does not provide tax or legal advice.  Clients should seek these services from their accountant and/or attorney.

Joe Hollak
121 SW Morrison Street
16th Floor
Portland, OR 97204
503-221-6680