By Brian Gordon, President of MAGA LTC.
While purchasing long term care insurance is the most popular way to plan for the possibility of needing long term care, it’s not the only way. Here are four other methods people use.
Method #1: Self-Insurance
Self-insuring means paying for long term care costs with your own assets. Some people plan for it; others who can afford to will simply use their own savings when the need arises.
Those who decide to build a self-insurance fund begin by calculating how much they need to save. They use current long term care industry data to set a target amount, as well as a target date for when they want to be fully funded.
If they choose to add any current assets to their fund, they’ll subtract that from their total target amount. Then, by dividing the total amount needed by the number of months they have to reach it, they determine how much they need to save each month.
Obviously, this is a simplification. Your best bet is to consult your financial planner.
Method #2: Relying on Family Members for Care
A number of people rely on family members to pay for or provide their care. They may not have the funds, but believe their family does. Or, they may feel it’s their family’s obligation to provide for them.
Often, this situation occurs unexpectedly because a long term care event happens and there is no other plan in place. Then, family members must scramble to come up with the money or change their personal schedules to become caregivers. This can be financially and emotionally exhausting.
If your plan is to rely on your family for care, don’t let it take them by surprise—talk to them. It’s a tough conversation to have, but it’s important.
Method #3: Contracting with a CCRC
A Continuing Care Retirement Community (CCRC) is a facility that offers increasing levels of care, including independent living, assisted living and nursing home care. As residents require more care, they move from tier to tier.
This is a good way to ensure your long term care needs will be met. In fact, some CCRCs have benevolent funds that help pay for care if savings run out. Before you contract with a CCRC, the facility will review your finances and medical status. But be warned: it typically requires a large down payment.
Tip: if you’re interested in this arrangement, have your attorney review the contracts to make sure your interests are protected.
Method #4: Relying on Medicaid
Medicaid will cover your long term care expenses, but to put it bluntly, you need to be poor to qualify. Each state sets its own eligibility threshold, but all require you to spend down nearly all your assets first.
If you have a spouse or partner, this will impact them greatly, so make sure to discuss it if this is your conscious choice. Frankly, Medicaid is typically the option of last resort for people with no other choice.
In short, when it comes to long term care planning, you have choices beyond insurance. However, once you evaluate your options, you may conclude that long term care insurance really is your best choice. If you’d like more information about long term care insurance, and if it might be a good choice for you, click here.