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Plan Ahead for Long-Term Care

Policies have become prohibitively expensive for many in recent years

Long-Term Care Insurance

Alamy

Put in place provisions for long-term care now to save time and money later.

En español | As our age group … well … ages, the chance of needing help with our day-to-day lives goes up. More of us will be seeking home health aides and, yes, even places to live where we can get the care we need. But how will we pay for long-term care?

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Median costs run $6,844 a month in nursing homes, $3,628 in assisted living facilities and $3,861 for full-time professional services at home, Genworth Financial reports.

The majority of Americans don't have anything close to that kind of money. When their savings run out, they rely on their children, Medicaid (the government program for people with limited income) or both.

People with higher incomes appear to be doing the same. Sales of traditional long-term care (LTC) policies fell 60 percent over the past 10 years, the American Association for Long-Term Care Insurance reports, as average premiums rose 44.5 percent. A typical married couple who are now 60 might pay anywhere from $2,600 to $5,600 a year, depending on the insurance company and benefit they choose. The affluent are putting large lump sums into combination LTC insurance and life insurance or annuity products. Those with fewer assets are going without. Here's a guide to your own decision on traditional LTC insurance.

Who should consider buying LTC insurance?

Primarily, married couples with substantial retirement incomes and significant assets. If one of you enters a nursing home or needs costly home care, the payouts from the insurance will help maintain the healthy spouse's standard of living. For single people, LTC coverage matters less. All your savings can go toward your personal care. (And by the way, single women are charged about 50 percent more than men for LTC insurance!)

How do you hold down costs?

A policy might be available through a company group plan, if you're still working. If not, buy leaner benefits—say, by waiting six months before payments kick in instead of three months. If you're in your 50s or early 60s, however, don't skip the automatic inflation adjustment, even though it's pricey.

What if you already have LTC insurance and your premiums are shooting up?

Do everything possible to keep the policy. Reducing benefits is better than giving them up. Of those who used care between 2006 and 2012, 23 percent had let a long-term policy lapse in the previous four years, according to the Center for Retirement Research at Boston College.

What about the new short-term care insurance?

You pay less and get less. Our 60-year-old couple might be charged $1,235 annually for 360 days of coverage at a fixed $150 a day. Policies vary in how they pay—by the day, by the service or by the location (at home or in a nursing facility). So know what you're buying, and know that you're not covered for a true medical catastrophe.

Bottom line?

For almost all of us, family and Medicaid remain the safety net.

Jane Bryant Quinn is a personal finance expert and author of How to Make Your Money Last.

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