Consider options for health care when planning retirement

05/29/2014 6:56 AM

08/08/2014 10:24 AM

Even a cursory glance at the financial aspects of retirement involves the discussion of risk management: Suddenly the growth factors used to increase a nest egg are rendered useless by the need for income from the same assets; increasing longevity, false inflation assumptions in Social Security check calculations and rapidly increasing health care costs give many pause as they near or pass their desired retirement date.

As people plan for this new time in their lives, the financial landscape can be mitigated with simple planning tools such as annuities and insurance, giving retirees the freedom to focus on what their retirement was meant to be: freedom from worry about the next paycheck and freedom to follow their dreams.

A vital aspect of any retirement conversation is the rapidly increasing cost of health care. It should come as no surprise that studies indicate more than 70 percent of those older than 65 will at some point need some sort of care. That care is often provided by family members with little fanfare or public attention – but many families eventually must turn to nursing homes and care funded by programs such as Medicaid.

So where does the controversial long-term care insurance fit into the picture? Does this tool have a place in planning for retirement?

Looking at the statistics of actual average time spent in nursing homes, the ability of Medicaid to cover these expenses for impoverished individuals, and the growing financial pressure on government programs at the state and federal levels, the answer is more challenging than some think.

In fact, the financial consequences of planning for long-term care using insurance is as much in the government’s best interests as it is in the best interests of the client. Programs such as the Kansas Partnership for Long-Term Care can provide a viable alternative for asset preservation and the policy can provide dollars at a significant discount.

Considering all the options to pay for nursing home care can seem unclear, whether a family is pressed to make a decision quickly or is planning for possibilities that are decades away.

Preceding many Medicaid claims is typically years of family involvement in the care of an individual. Usually this is provided by one child, and in some families this can fuel resentments. Arguments have ensued – family members stop talking – and the care is provided grudgingly until an alternative is needed.

Even when the family is all working together, unskilled care is not always an option. At some point, more skilled assistance is often needed, and income that was once used for daily living is now diverted to pay for skilled care in the home or in an assisted living facility.

This funding source may not last long, as the assets providing this income were never meant for such a burden.

The greatest impact on a family, then, involving a chronic health care need is often not the financial consequences of providing such care – it is the emotional and relational impact of decisions about who is caring for a relative, or whether one feels forced to turn to residential care in a facility.

Long-term care insurance can be an alternative to Medicaid or sapping all family savings to provide funding for nursing homes – and the government wants to provide people every possible incentive to buy it so they don’t have to use Medicaid.

Even more important, however, is that long-term care insurance could allow people the choice of staying in their home, where they could receive good and supportive care in a family environment.

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