By Ted Stricker, CFP®
Long-term care is a topic few wish to discuss, let alone think about. The unfortunate reality is that many of us will require some type of custodial care late in life, when we are less able to care for ourselves, and our family and community may not be able to provide all our needs, including proper medical attention and daily care. Current statistics reveal that 70% of seniors over age 65 will require long-term care at some point in their lives, and the average period of care can be as much as 3.7 years for women versus 2.2 years for men.
Custodial care can be expensive. A full-service facility in the New York or New Jersey area can cost $150,000 – $200,000 annually. Even having a full-time, at-home caregiver can run upwards of $100,000/year, not including medication and other medical or health supplies. Many seniors and their families are often ill-prepared for such expenses, which is why planning ahead is essential.
Considerations Late in Life
Even though children are grown, the retirement lifestyle may still be expensive to maintain, even late in life. The ability to remain near family and one’s familiar community are all important aspects to consider. These wishes, along with the desire to remain in the same home, all require additional funding.
The problem becomes one of choice; having the ability to choose where and how one receives their care when either cognitive issues or physical challenges arise is crucial to living one’s last years in dignity and remaining with family and community.
Should You Self-fund Your Future Care?
Paying for long-term care costs can drain even large bank and investment accounts. With seniors living longer, what was once a two-to-three-year period of custodial care has lengthened to three to four years. Although that might not sound like a big difference, depending upon the type of care required, this may result in an aggregate cost of hundreds of thousands of dollars over time. If a senior’s financial resources only consist of retirement savings in IRAs or other investment accounts, utilizing these for one’s care must take tax considerations into account as well. Family members may not have the means to help either, since they may have children to raise and other expenses that leave little to spare.
Another consideration is how one’s wealth is structured. Businesses and real estate are often illiquid assets and impractical in terms of funding additional medical and health expenses. All too often, the need for long-term care comes at inopportune times when selling such assets may not be favorable.
Insuring Your Care Could Be the Answer.
Insurance can offer a solution. Long-term care insurance has come a long way since its inception several decades ago. While premiums can be expensive, depending upon one’s age and health condition at application, the leverage provided between premiums paid over time and benefits received could be significant. This insurance could be regarded as both a safety net and wealth preservation tool. Many of our clients wish to preserve a portion of their wealth for their families and charitable causes; long-term care insurance can help accomplish this.
Consider a Hybrid Policy
There are two basic types of long-term care insurance today; traditional and hybrid policies. Traditional policies typically cover just custodial and other extra-care costs. There may be a “return of premium” rider with more recent policies (that return the aggregate premiums paid to named beneficiaries if the insured passes without needing custodial care), but these premiums tend to be much more expensive.
There are now hybrid policies that combine custodial care insurance with life insurance that are receiving much more attention these days. These policies are a blend of the two goals: provide coverage for custodial care costs (including at-home situations) as well as a life insurance death benefit, even if custodial care never occurs for the named insured individual. These policies often come in two forms; a life insurance policy with a custodial care rider or a chiefly custodial care policy with a life insurance death benefit (some even with a small death benefit even if the custodial policy’s benefits are fully claimed).
The main advantage of having this insurance is preserving other assets for alternate financial objectives and having greater choices of how and where (and what standard of quality) one receives health and custodial care late in life. Having insurance coverage can offer confidence that, should custodial care be required in your future, you will have the means to remain close to your family and community,
Incorporation Within the Overall Financial Plan
A key to successfully including long-term care expenses in your financial future is to consider all aspects and have them working together; your financial and personal objectives, charitable intentions and keeping with halacha. At Bernath + Rosenberg, we take the time to incorporate all these in your financial planning to build a sound financial future.
We Can Help
Our team at Bernath + Rosenberg is here to guide you through the uncertainties and simplify your financial life. With our Certified Public Accountants and CERTIFIED FINANCIAL PLANNER™ professionals, we stay current with financial strategies and planning techniques that fit your unique needs.
To get started and make the most of your hard work, schedule a meeting by calling (212) 221-1140 or email [email protected].
About Ted
Ted Stricker is a partner and financial advisor at Bernath + Rosenberg, a full-service accounting, tax, and wealth management firm with offices in Monsey, NY, Lakewood, NJ, Cedarhurst, NY, and Miami Beach, FL. The firm demonstrates a personalized approach to custom-tailored solutions and an unwavering commitment to client service. With over 26 years of experience in the financial services industry, Ted manages the firm’s wealth management team, and specializes in designing financial plans for business owners and affluent families. Since joining the team in 2015, he provides practical and sound advice, combining innovative approaches and solutions that reflect clients’ personality, lifestyle, and goals.
For the ninth year in a row, Bernath + Rosenberg has been named as one of the leading CPA firms in financial planning by Accounting Today, a publication that receives hundreds of submissions each year and features the Top 150 Firms in the nation. Ted is a CERTIFIED FINANCIAL PLANNER™ practitioner and is a member of the Financial Planning Association. To learn more about Ted, connect with him on LinkedIn.
