Long Term Care Planning Tips & Cost Saving Strategies

Interested in learning more about long-term care options? 💡

💥 Find out how you can save on costs to get the necessary care for yourself or a loved one with some insight provided by Michael Baum, CFP®, RICP®.

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Welcome to You and Your Money. Empowering you to reach your goals with tips to help you Plan Well, Invest Well and Live Well. Today's episode features Michael Baum, vice president and associate financial advisor at Weiss, Hale and Zahansky Strategic Wealth Advisors. Now on to today's topic. All right, Mike, let's dive into today's topic. Explain what extended care or long term care encompasses and why it proposes a significant financial challenge for many families. Of course, so long term care involves services like in-home care, assisted living facilities, and nursing homes for individuals who need assistance with daily activities due to their age, illness or disability. And these challenges arise from substantial costs associated with the services I just talked about. Many are not covered by insurance or government programs and that puts a huge financial strain on the individual or their families to cover the cost. First step in managing these costs, planning ahead, being prepared. So elaborate on how individuals can proactively tackle this. I would say the first step in planning ahead just involves, you know, researching what the available care options are in your area and understanding their associated costs. And then, of course, considering long term care insurance depending on your age and the affordability of that. There are a number of great resources online that can help you estimate the costs of various levels of care in your area. So I would definitely say start there and those numbers can be a little eye opening. But by gaining a clear understanding of the financial challenges, individuals can start to prepare for them and explore the best solutions for them. What's an approximate age that you find people first considering and or purchasing long term care insurance? That's a good question, Wayne. I think, you know, if you're if you wait too long, you may be deemed uninsurable. You know, that's just it becomes riskier for the insurance company to issue the policy. So I think the optimal range to apply for that insurance and when most people start thinking about it is probably when they're in their fifties or about the time that they start to see their parents go through some of these issues. So yeah, probably late 40’s and into your 50’s. And if you wait into your 60’s, that that's when it may start to become a little bit challenging to get that policy issue. All right. So let's hypothetically say that someone listening now is in their 50’s. They do not have long term care insurance. What are the upsides? Why do people buy that? And is there a downside to buying long term care insurance? There is. And definitely going to talk about that a little bit more. But yeah, the long term care insurance can be quite expensive and the rates on long term care insurance over the last, you know, decade or so have been rising dramatically. So, you know, you apply for a policy, you understand you're going to pay, you know, X amount per month as a as a monthly premium, and then that premium consistently rises. So it becomes just a very expensive thing to maintain. And, you know, if you ultimately don't end up needing any long term care, then that's an expensive insurance policy to never end up losing. Really good answer. Are exploring homecare options and other strategy to manage extended care expenses. Try to shed some light on how in-home care can be a cost effective alternative. Yeah, well, in-home care allows individuals to get the support they need while staying in the comfort of their homes. And it is it is lower cost than moving full time into a nursing home or an assisted care facility. It's just the living facility. So this option is particularly appealing to many older adults. In fact, a recent survey from HRP said that 77% of adults 50 and older prefer to age in place. So clearly, people want to stay in their homes. They want to maintain some level of independence. And that's where, you know, in-home care can really work because it's a little bit cheaper and it can be a little bit more on your terms, I guess. Good point. Now, Medicaid plays a crucial role in assisting with long term care costs. How can individuals navigate Medicaid to benefit from this program? Well, Medicaid is a federal program that's administered at the state level and provides health coverage to low income individuals. So Medicaid can cover nursing home care costs if you're eligible. But it's important to understand the income and asset limits associated with Medicaid and consult with professionals to determine your eligibility and navigate the application process. It may not be a fit for for everyone. Community based services like adult day care can provide respite for both individuals requiring care and their caregivers. Michael, how can these services help manage costs and provide relief for families? Well, I'm glad you brought up the caregivers Wayne because, you know, think about who these caregivers typically are. You know, it's often the children caring for their aging parents. Right? So these caregivers are often faced with providing care for their parents at a time where they're juggling a lot of responsibilities in their own life. They're likely still working. They may have their own kids or maybe even grandkids. You know, I've heard a lot of instances of caregivers who are babysitting grandchildren one day and an elderly parent the next. So many of these caregivers are willing to go to great lengths to maintain their parents independence and help keep them in their home. But it can come at a tremendous cost to their own well-being. And it's just really, you know, such a heavy burden. So things like adult daycare and other community based services, they can be really, you know, invaluable because they allow the individual who needs the care to remain in their home. But they're cost effective compared to full time care facilities. And they provide that much needed break or relief for the family. Who's getting care? Tax benefits related to long term care expenses can also be a valuable consideration. Could you explain how individuals might benefit from these tax advantages? Right. Well, a lot of time, long term care expenses, there may be tax advantages associated with them. You may be able to deduct some of the cost against your income taxes. But, you know, of course, anything tax related, we have to recommend you consult a tax professional to understand the specific benefits available and how to best utilize them. And an innovative insurance option for managing long term care expenses is linked benefit long term care insurance. Explain how that approach works and its potential advantages. Right. Well, we talked a little bit about a standalone long term care insurance policy. You know, you were asking when do people apply for these types of policies and what are the potential downsides of having that type of insurance? And I said, you know, the cost is somewhat variable. The rates, at least especially in recent years, have gone up tremendously. So that existing policy, it gets more and more expensive to maintain. So one sort of solution to that in some ways anyway, is the linked benefit policy. And what that is, it's a it's an insurance policy that combines regular life insurance or an annuity with long term care benefits. So it creates a pool of money that can be used to pay for long term care expenses should you need them. But if you never end up needing long term care, you know you still have that insurance or annuity intact so your beneficiaries can receive a death benefit or the cash value in the policy. And this essentially answers the common objection to buying an expensive long term policy, which is what if I never need long term care, I'll just thrown all my money away. So, you know, the one downside, I guess with linked benefit policies is that they are typically more expensive on the face of them. They cost a little bit more because of the multiple ways that the policy can be used, but they do not have premiums that increase. You know, they're consistent and predictable over time. So it can be a nice solution for somebody who, you know, already has an existing insurance policy and wants to exchange it for a different type of policy that has this linked benefit to it. Or if you're, you know, just applying for insurance now and want to have something that gives you that flexibility, it's a good solution. And before we wrap things up, what's your key advice for our listeners regarding planning for extended care and managing the associated costs? Well, we've talked a fair amount about managing the associated costs. And you know, that really starts with just researching what it costs. So people are aware, you know, you're either going to need some sort of insurance policy to cover those costs or you're going to need to private pay and it's costly. So you want to start thinking about that and understanding what that might look like. But aside from managing the costs, I think my best advice would be to have that conversation, you know, with your family, your partner, your children, your loved one about the type of care that you would optimally like to receive, you know, in staying in your home, really important to you. You know, some people are just dead set against any sort of nursing home and but others aren't, you know, And so being clear and communicating about how you would like a long term care situation to be handled with your family and maybe even going so far as to sort of document those wishes is a really good step in the process of being prepared and planning ahead for, you know, what we all hope won't come, but unfortunately does end up happening for many of us. Time marches on. Good information, Mike. Thanks for sharing your valuable insights and expertise on long term care planning and cost saving strategies. If you are seeking assistance in planning your financial future, including long term care planning, you can request a complimentary consultation on the Weiss, Hale and Zahansky website. whzwealth.com or call them at 860-928-2341 Mike, thanks for being here today. Thank you, Wayne. It's a pleasure discussing this important topic. That's it for today. Thanks for listening to You and Your Money. Find even more episodes, videos and other resources at our web site, whzwealth.com. Be sure to come back next week for more tips to help you live fearlessy and pursue your financial and life goals. Until then, live well. Weiss, Hale and Zahansky Strategic Wealth Advisors offer securities and advisory services through Commonwealth Financial Network member FINRA/ SIPC, a registered investment advisor. Fixed insurance products and services offered through CES Insurance Agency. They practice at 697 Pomfret St., Pomfret Center, Connecticut, 06259 and can be reached at 860-928-2341. Weiss, Hale and Zahansky Strategic Wealth Advisors do not provide legal or tax advice. The tenured financial services team strive to support clients in achieving their financial life goals. For more information regarding wealth management and customize financial planning with Weiss, Hale and Zahansky Strategic Wealth Advisors, please visit. www.whzwealth.com.