The high cost of long-term care represents a serious threat to individuals as they grow older. It’s a problem that’s staring many baby boomers right in the face. The generation born between 1946 and 1964 is rapidly aging and many will need assisted living, nursing home and other forms of care.
Considering the costs involved, it’s vital you determine how likely it is that you or a loved one will require long-term care based on factors which can impact your health. It’s even more important to begin planning how you’ll fund the expense of long-term care. Taking action sooner rather than later can make a big difference in your health, lifestyle and financial situation.
The choices you make today can have a tremendous impact on your life 20 or 30 years from now. If your doctor has advised you to get more exercise and watch what you eat, following her advice can markedly improve your health and reduce the likelihood you’ll need long-term care. If your job is highly stressful, taking steps to deal with it, perhaps through exercise, yoga and meditation, may represent an important and positive lifestyle change. Anything that reduces your risk of developing cardiovascular disease, obesity, diabetes, cancer and other serious health care risks will likely help you avoid needing long-term care in the coming years.
If Alzheimer’s disease is common in your family or if there’s a history of heart disease or cancer in your genetic background, it’s probably in your best interest to begin planning ahead for long-term care. There are more options available these days, such as assisted living, home health services, adult day care, independent living and hospice care, and many ways you can prepare for assuming those care costs.
There are several factors to consider when it comes to paying for long-term care. If you’re in your 50s, consider taking out a long-term care policy (some financial planners advise doing this earlier). Or, if your employer has a health savings account (HSA) option, you can make contributions that are fully tax-deductible and use the earnings later to help fund long-term care. An HSA, unlike a flexible spending account, rolls over from year to year and its growth is tax-deferred. It is a savings account specifically designed to help you pay for medical expenses.
Many people use a reverse mortgage to free up money for long-term care. A reverse mortgage allows you to borrow against the value you’ve accumulated in your home, and your lender makes payments to you computed based on a percentage on your home equity. Credit requirements are modest, and you can remain in the home even if your debt exceeds the value of your home. Be aware of the pros and cons of reverse mortgages. For example, your debt will increase while your equity goes down. The equity that would become part of your estate will decrease as you receive payments, and you are not the owner of your home.
A life insurance policy that generates cash value can also provide you with a funding source. You can sell a policy to generate revenue for medical expenses, “surrender” it to your insurer for a cash settlement, or make advance use of your death benefit (any amount used will count against your beneficiaries after your death).
Learning your care and payment options early and preparing for long-term care is highly recommended by financial advisers. That means it’s important to assess your needs, financial situation and consider how you might fund long-term care.
June is the co-creator of Rise Up for Caregivers, which offers support for family members and friends who have taken on the responsibility of caring for their loved ones. She is author of the upcoming book, The Complete Guide to Caregiving: A Daily Companion for New Senior Caregivers.