Is Long-Term Care the Missing Piece in Your Retirement Plan?

Is Long-Term Care the Missing Piece in Your Retirement Plan
Picture of Scott Hohman, CFP®, AIF®

Scott Hohman, CFP®, AIF®

If You’ve Focused Solely on Accumulating a Nest Egg, You’re Missing a Piece of the Puzzle

Is long-term care part of your retirement plan? If not, it should be. If you’ve been carefully planning for your retirement, you’ve likely got a comprehensive plan in place to protect your financial security. It accounts for taxes, keeps the right amount of risk in your portfolio, and provides the income you’ll need for monthly expenses. However, many near-retirees have not accounted for one significant expense: long-term care.

Will You Need Long-Term Care?

According to the U.S. Department of Health and Human Services, approximately 70% of people aged 65 and over will require long-term care at some point. Whether it’s paid home care or residential care, the cost can prove overwhelming if you haven’t prepared ahead of time. Consider, for instance, that the median monthly cost of a private room in a nursing home is nearly $9,000. Clearly, this sort of expense can put your financial security at risk, and even reduce or eliminate any legacy you may hope to leave to loved ones.

What’s Holding You Back?

If your retirement planning has focused solely on accumulating money for retirement, it’s time to consider the unique challenges you might face once you retire – and what those challenges may mean for your finances.

Many people put off long-term care planning because it can be uncomfortable or distressing to think about not being capable of caring for yourself as you age. Others think that the only option is a longterm care insurance policy, which can be cost-prohibitive for many people – especially with premium rate hikes in recent years.

Regardless of why you’ve put off this aspect of your planning, though, there’s no time like the present to get a solution in place that fits your needs.

SEE ALSO: How to Make the Most of Your Health Savings Account

Start Talking About Long-Term Care Now

If you want a secure retirement, begin talking with your family and your financial professionals now about long-term care. None of us can predict the future, but the data indicates that a majority of retirees will face health challenges that require long-term care for an unknown length of time. While planning for the unknown isn’t an exact science, you do have several options when it comes to setting yourself up for a more secure financial foundation in retirement.

Your Options for Financing Long-Term Care

It will be important to consider your unique situation – and to discuss it with your financial advisor – but each of these options can help protect you from long-term care bills upending your retirement finances.

Traditional Long-Term Care Insurance

As mentioned already, premiums have risen substantially for long-term care policies in recent years. However, this may still be the best option for you. These policies are specifically designed to cover longterm services and supports for activities of daily living, such as bathing, dressing, and eating.

Policyholders are reimbursed a daily amount, but there are often limitations. Many policies place limits on how long or how much they will pay. So, it’s a good idea to closely examine all the details before you purchase long-term care insurance, including whether the insurance company can increase your premiums at will.

It should be noted that long-term care policies require medical underwriting, so you may not qualify for one if you are already in poor health.


Similar to long-term care insurance, an annuity is a contract between you and an insurance company. They are not right for everyone – and there are various types of annuities – but many people use them as strategic investment vehicles for retirement. They provide periodic payments for a specified timeframe, as well as death benefits for a beneficiary and tax-deferred growth. Some annuities come with riders that can help address long-term care needs, such as the cost of a nursing home. Since a rider typically won’t require medical underwriting, this can be a good option for someone whose health disqualifies them from traditional long-term care insurance.

SEE ALSO: Prepare Yourself for These Unwanted Surprises of Early Retirement

Asset-Based Long-Term Care Insurance

Traditional long-term care is a bit of a “use it or lose it” proposition, which makes it unappealing to many retirees. An asset-based policy is designed to let the policyholder use their death benefit while still alive to fund long-term care needs. If you never require long-term care, the death benefit goes to your heirs – tax-free, at that.

Life Insurance with a Long-Term Care Rider

Often referred to as a “linked” policy, this is a scenario in which you buy traditional life insurance but add a long-term care rider as a secondary benefit. Doing so means you could accelerate the use of your death benefit to pay for long-term care, if needed.

Which Option is Best for You?

Every person’s financial situation and retirement goals are unique, meaning your long-term care strategy should be, too. If you haven’t discussed long-term care with your financial advisor yet, now is the time to begin the conversation. Not only can a professional help you determine which option best serves your needs, but they can also help you research the financial strength of any insurance carrier you’re considering.

If you’d like to speak with a member of the Resolute Wealth Advisor team about your long-term care planning needs or any other aspect of your retirement planning, contact us today to schedule a conversation.

The views expressed represent the opinion of Resolute Wealth Advisor, Inc. (RWA). The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and nonproprietary sources that have not been independently verified for accuracy or completeness. While RWA believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and the RWA’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in equity securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.

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