By Eric Rolshoven, MBA
Long-term care costs are an increasingly important component of most people’s retirement plans. According to the U.S. Department of Health and Human Services, more than half of people turning 65 this year will need long-term care at some point in their lives. (1)
But long-term care isn’t cheap. National median costs in 2021 may range from around $1,600 a month to $9,000 a month depending on the type of care needed and the location you live. (2) What’s more, costs are only going up.
These high costs and the likelihood of you needing long-term care in the future highlight the importance of properly building these expenses into your ongoing retirement plan.
Once I’ve Created A Long-Term Care Plan, Aren’t I Done?
Sadly, the short answer is no. As markets and costs change, you’ll want to review your long-term care plan to make sure it’s still going to adequately protect you and your family. Just as household costs typically rise year over year due to inflation, the costs for long-term care services rise as well.
(Use this helpful calculator from Genworth to project the cost of long-term care 20 years from now in your state!)
A financial advisor experienced with long-term care planning can help you review any long-term care insurance products or annuities older than 5 years to make sure the coverage you purchased is still adequate. If your coverage amount is now outdated, you will need to strategize next steps to make up for those gaps.
What Should I Do If My Rate Increased?
If you own a long-term care insurance policy or annuity, you should know that these types of policies are often subject to rate increases. Although rate increases are never fun, it doesn’t automatically mean it’s time to drop your policy. Securing a new policy in its place could result in even higher premiums—which then still might be subject to increases.
Still, it’s worth reviewing your coverage level in light of rate increases you’ve experienced. Although we rarely recommend reducing your coverage, there may be some instances where it’s appropriate. For example, if you’ve recently moved to a state with much lower costs of living (and thus lower long-term care costs), it may be acceptable to consider reducing your coverage.
Because reducing your coverage is not a good option for most people, that doesn’t mean you don’t have choices in front of you. Some insurers offer inflation protection add-ons that will help soften the blow of rate increases. At least with inflation protection, your benefit amount is increasing as well.
We Can Audit Your Long-Term Care Plan!
Although long-term care products can be useful tools for long-term care planning, they can also be complicated and frustrating. At Treasure State Retirement Planning, we’ve helped dozens of pre-retirees create and update their long-term care plans successfully. We’d like to see if we can help you as well. Schedule an appointment using my online calendar today to discuss whether your long-term care plan needs review.
About Eric
Eric Rolshoven is founder and senior financial advisor at Treasure State Retirement Planning, an independent investment management firm in Florence, Montana. With over 30 years of experience in the financial industry, Eric focuses on providing his pre-retiree clients with customized insurance and financial strategies to protect and grow their assets, achieve financial security, and retire worry-free. Eric is known for explaining advanced financial concepts in an easy-to-understand manner and sees part of his job as helping to bridge any knowledge gaps for pre-retirees and retirees. Eric specializes in helping people maximize their Social Security benefits and holds frequent seminars and workshops in order to help his community be better informed about their financial options. Eric holds a Master of Business Administration with an emphasis in Finance from the University of Montana. When he’s not working, you can find Eric spending time with his wife, Julie, and their two grown children. Eric is a veteran Scout leader and baseball coach and enjoys hunting, fishing, hiking, golfing, and traveling. To learn more about Eric, connect with him on LinkedIn.
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(1) https://aspe.hhs.gov/basic-report/long-term-services-and-supports-older-americans-risks-and-financing-research-brief
(2) https://www.genworth.com/aging-and-you/finances/cost-of-care.html