November is Long Term Care (LTC) Insurance Awareness Month. The goal is to raise awareness of LTC and promote discussions on its importance and whether LTC could be a necessary addition to your financial plan.
LTC insurance is a specific type of insurance policy that pays a benefit when the insured is no longer able to perform two or more activities of daily living (ADLs). ADLs include dressing, eating, bathing, and transferring. The intent is to help offset the cost of assisted living or a home health aide.
The general population is not well-informed about LTC insurance. In fact, a recent survey showed that while 29% of respondents thought they had LTC insurance only 4% actually did.1 Some individuals mistakenly believe that their long-term care needs will be covered by health insurance. Others confuse long-term disability insurance for LTC insurance. The difference is that LTC insurance reimburses a set dollar amount for services to assist with ADLs, while long-term disability insurance replaces a percentage of income if the insured is no longer able to work due to a disability.
As life expectancies have increased the need for LTC has gone up as well. As you might expect, the cost for care has significantly risen over time. The 2024 projected monthly cost for an assisted living facility is $4,917, a home health aide is $5,625 and a semi-private room in a nursing home facility is $8,641.2 A study by Genworth found that in less than 10 years, the monthly cost of many of these services will have increased by more than $1,000.3 (Keep in mind that these are national medians and the costs in certain regions can vary.)
Given these costs, it’s not difficult to see how an LTC event can quickly erode one’s savings. It is important to create a plan for when we are unable to independently care for ourselves. Don’t despair; we are here to help. Please reach out if you’d like to discuss how LTC may impact your retirement plan.
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