Amy & Dan Smith's Planning For Life: There If (Or When) You Need It

Long-term care is one of the biggest and often unexpected expenses in retirement. Thinking about funding a long-term care plan now can save you later.

It seems we don’t pay much attention to long-term care until it directly affects us. Sure, it may pop up on our radar when consoling a friend who’s bearing the weight-physically and financially – of a loved one’s care or through the trials and tribulations of funding an aging parent’s assisted living needs. However, there may come a time when you or your spouse could face these challenges and decisions.  Few Americans place long-term care needs high on a list of concerns. In fact, more than half don’t have a plan for when they’re unable to independently bathe, dress, eat or get around, according to the 2012 State of Planning Survey.

Of course, it’s hard to think of ourselves in need of care, whether that’s adult daycare, assisted-living services or nursing home care. And, it can be hard to plan for future unknowns, when immediate costs demand your attention. But timing is critical when it comes to funding long-term care, and most consider mid-50’s the ideal age to consider long-term care insurance. Waiting much longer could bring much higher premiums.

Thinking about it now also gives you time to see how it fits into your overall retirement plan and could help protect your assets, preserve your independence, and ensure quality care. Plus, having that safety net could potentially relieve friends and family from the stress of unexpected financial and emotional burdens.

Don’t Underestimate Long-Term Care Costs
Long-term care is one of the biggest and often unexpected expenses in retirement. Most healthcare insurance policies, Medicare and Medigap/Medicare supplemental insurance don’t really cover what you’ll need, and only limited assistance is available from government programs. Like Medicare, healthcare insurance policies only pay benefits for short-term rehabilitative care. For a true long-term care plan, you need insurance that offers comprehensive coverage spanning years. And while an ample portfolio might absorb future long-term care costs, most people prefer to rely on quality insurance rather than pay out of pocket.

Funding Your Plan
Traditional long-term care policies can create a financial safety net should you become incapacitated and relieve your family of the burden of providing for your care-physically and financially. Covered costs can include round-the-clock home care, assisted living, adult daycare, and nursing home care. The premiums depend on many factors, including the type of policy and your age at the time of purchase. For business funded plans, long-term care premiums can be tax-deductible.

Funding your long-term care plan lets you make your own choices, while you still can, takes the burden off your children’s shoulders and, should the most expensive scenario occur, it would not devastate your retirement income plan for you or your spouse. There are many details to ponder when choosing the right policy. Talk to your financial advisor to help determine what coverage you may need and how you’ll fund it.

Guarantees are based on the claims paying ability of the issuing company. Long Term Care Insurance or Asset based long-term Care Insurance Products may not be suitable for all investors. Surrender charges may apply for early withdrawals and, if made prior to age 59-1/2, may be subject to a 10 percent federal tax penalty in addition to any gains being taxed as ordinary income. Please consult with a licensed financial professional when considering your insurance options. Investing involves risk and investors may incur a profit or a loss. Past performance may not be indicative of future results. Diversification does not ensure a profit or protect against a loss. The foregoing contains general information only and is not intended to convey investment advice.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, He has practiced law in Loudoun County since 1980.