Q: Does Medicare pay for long-term care?
A: Unfortunately, many people mistakenly think that Medicare pays for long-term care. Under certain limited conditions, Medicare will cover nursing home care when there is a need for skilled nursing care or rehabilitation services. But it does not cover the ongoing, daily custodial care that's most commonly needed by people who have physical or mental disabilities. That's called "custodial care" and is nonskilled, personal help with tasks like bathing, dressing and eating.
More specifically, Medicare coverage is limited to up to 100 days (with copays for days 21-100) in a Medicare-certified skilled nursing facility if your doctor says you need skilled nursing care or rehabilitation. You must have had a three-day hospital stay for a related condition prior to going to the nursing home and you will generally need to go within 30 days of the hospital discharge. Medicare will also pay for part-time and intermittent skilled nursing care or certain therapies in your home if your doctor plans for and orders it from a Medicare-certified home health agency. You must also be homebound (unable to leave home without help and considerable effort).
Q: Will disability insurance cover my long-term care needs?
A: Disability insurance is meant to replace a percentage of your salary if you are sidelined by injury or illness and unable to work. It's designed to cover expenses such as your mortgage and food, but it's usually not enough to pay for the extra care you may need if you're disabled. Typical employee benefit policies provide about 60 percent of your before-tax salary. You may be able to purchase additional coverage (up to 70 or 80 percent) for a small increase in cost.
However, three out of five people have no private disability coverage at all. Check with your employer to find out exactly what benefits you do have.
People are eligible for Social Security disability insurance benefits if they have earned enough Social Security credits and are unable to work because of a disability that has lasted or will last for at least 12 months, or is expected to end in death. But similar to standard private disability insurance, payments are unlikely to be sufficient to cover the added costs of long-term care.
Q: Can you tell me about the new government-run long-term care insurance program?
A: The 2010 health care law created the first-ever government-run plan designed to offset the high cost of long-term care. Called CLASS (Community Living Assistance Services and Supports), the program is voluntary and will most likely start enrolling people in late 2012 or early 2013. Participating employers will deduct premiums from the paychecks of anyone 18 or older who doesn't opt out of the program. Just how much will be deducted is still being hammered out, though the younger you are, the lower your premiums will likely be. People who are self-employed or those who work for employers who don't participate will also have the opportunity to enroll.
Depending on your degree of disability, you'll receive cash benefits that you can use to pay for a range of nonmedical services including personal care, modifications to your home, assistive technology or transportation. It can also be put toward the cost of assisted living or nursing home care.
You're eligible to receive benefits if you've been paying into the plan for five years, and working for at least three of those years. What's more, CLASS benefits can be combined with any private plans you already have.
Q: How can I find a financial planner to help me figure out how much I need to save for retirement?
A: Most people have no idea what they realistically need to save in order to live comfortably once they stop working, or work less. You can't assume that your expenses later on will be less than they are now — in fact, for many, they actually increase. You may have higher than average medical or long-term care bills, or you may spend more on travel and other leisure activities.
Some people prefer to hire a professional financial adviser to guide them through the process. However, since anyone can call themselves a financial adviser, you need to do your homework. Financial planners evaluate every aspect of your financial life — savings, investments, insurance, taxes, retirement and estate planning — and make recommendations to help you reach your goals. Investment advisers zero in on your stocks, bonds and other securities. And estate-planning attorneys draft legal documents such as your will, financial power of attorney or advance directives. To find the best fit:
- Get a referral. The best recommendation is always a personal one, especially from someone whose life circumstances are similar to yours. Ask someone you respect, such as friends and family, your lawyer or accountant, even your boss.
- Interview at least two or three people. You're hiring someone for an important job — chief financial officer of your investment plan — so take it seriously and meet several people before making a decision. If they don't offer you a free initial meeting, cross them off your list. While you should be comfortable talking to this person, don't hire them just because you like them. Hire them because they're smart.
- Ask about their typical client. If the profile sounds like you, you're on the right track. It's best to work with someone who has built his or her practice around people who are like you in their goals, lifestyle and net worth.
- Find out what services they offer — and how much they charge. Financial planners have different fees depending on the services they provide. Some charge a percent of the assets they manage; others charge a flat or hourly fee. Still others are compensated based on the products they sell you. Get a clear written statement about fees and don't hire anyone who won't give you one. Also keep in mind that someone paid on commission may have his, and not your, best interests at heart.
- Check backgrounds carefully. Find out how long they have been doing this kind of work, as well as any specific training they have. Verify credentials through professional organizations, licensing agencies or various certifications. Ask for and check references. Also see if they have ever been disciplined by the National Association of Securities Dealers or any other regulatory agency, such as the U.S. Security and Exchange Commission.
For more information on finding an adviser who's right for you, visit aarp.org/money, the Financial Planning Association (800-322-4237), or the National Association of Personal Financial Advisors (800-366-2732).
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