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Understanding Long-Term Care

Understanding Long-Term Care

February 02, 2023

Let’s face it, no one wants to talk about insurance, but it can be critical to a healthy retirement plan. Long-term care can be an expensive drain on family resources. So it makes sound financial sense to develop a strategy to protect yourself—and your family—should the need for long-term care arise.

Many members of the baby boom generation are now reaching retirement age. In fact, approximately 10,000 baby boomers turn 65 every day, a trend that is expected to continue until 2030. That works out to about one person every ten seconds. How fast is that? The life expectancy of the U.S. population is expected to grow from 79.7 (as of 2017) to 85.6 by 2060.

The aging of America is accompanied by certain challenges. For example, the U.S. Department of Health and Human Services reports that at least 70% of people turning 65 are expected to need long-term care services at some point in their lives. While it’s difficult to predict what type of care any one person might need or how long they will need it, statistics reveal that the average person needing long-term care will need it for about three years. Women are averaging longer at 3.7 years to men at 2.2 years. And 20% of us will need care for more than five years. 1 

Since so many people over age 65 are expected to need some level of long-term care eventually, it makes sense to have a better understanding of long-term care and how it works—and to consider what you can do to prepare financially.


What is long-term care?

Long-term care includes skilled nursing care—such as the rehabilitative care needed after an extended hospital stay. But that’s just one of the many types of care available.

Long-term care also includes assisted living facilities. These are environments for individuals who can no longer function independently but don’t need daily care. However, these facilities offer occasional help with what are referred to as “activities of daily living” including bathing, dressing, eating, transferring—getting in and out of bed or wheelchair—and walking.

It also can include home health care, that is, occasional help with the activities of daily living we just listed, as well as help with meals, budgeting, house cleaning, medication management, and even transportation. In this case, however, the help is offered by hired assistants who come to your home on a regular basis.

Long-term care can also include respite care—an occasional break for family members who provide long-term care services.


How much does care cost?

The costs vary by state and region, but the U.S. Dept. of Health estimates the average monthly cost for a semi-private room in a nursing home to be 6,844 per month2. That expense can take a big chunk out of your retirement plan without long-term-care insurance.


What are your choices for long-term care?

There are many, however, you have two primary choices: self-insure or purchase long-term care insurance.

Self-insuring involves depending on personal savings and investments to fund any long-term care needs. This option gives you complete flexibility but requires that you be prepared for the potential expense and could dramatically impact your overall retirement strategy. Unfortunately, self-insuring is a choice many make by default—simply because they haven’t planned for long-term care expenses at all.

One question that naturally arises is: What about Medicare?

A lot of people think Medicare and Medicaid will pay for their healthcare needs. But, in actuality, Medicare only covers necessary medical procedures, not assistance with eating, bathing, and other daily activities and Medicaid only provides for those in poverty.

Your other choice is to transfer the financial risk of long-term care to an insurance company through long-term care insurance. A long-term care policy can cover all levels of care, from skilled care to custodial care to in-home assistance. Many find it to be an appropriate way to protect themselves and their loved ones from the potentially devastating cost of long-term care.

There are a number of pros and cons of long-term care policies. On the pro side, a long-term care insurance policy can protect your assets. You won’t need to dip into your retirement funds to cover the cost of care, and under certain conditions, your premium may be partially or completely deductible. In addition, in the event of a long-term illness, long-term care will enable you to preserve your dignity, meaning you can maintain your standard of living and, for as long as possible, your independence.

On the con side, you need to be sure you are comfortable with the cost of premiums. It wouldn’t make sense to pay premiums for a number of years only to let the policy lapse because the premiums push your budget too far. Long-term care insurance also can be fairly complex. Policies offer a wide range of benefits for which they charge a wide range of premiums. It’s critical to take a close look before committing to a policy or working with a professional who understands what to look for.

What do you need to bear in mind when choosing a long-term care policy?

  • First, make sure you understand the limitations and features of the policy you’re considering. For example, in most cases, policyholders cannot collect benefits until their disability reaches certain levels. And most policies specify how much they will pay for each day of care and how long.
  • Second, take a close look at the type of care covered. Long-term care policies can cover everything from skilled care in a nursing home to periodic custodial care in your home. You need to understand exactly what is covered and what is not.
  • Third, look at the total benefit. You don’t want a policy that will run out of benefits just when you need them most. And you don’t want to pay for coverage you’re unlikely to need.
  • Fourth, look at the waiting period before benefits are scheduled to begin. You want a policy that’s renewable.
  • Fifth, consider inflation protection. The cost of healthcare has been rising more rapidly than the general rate of inflation. It won’t help to have a policy that falls behind rising healthcare costs.
  • And finally, consider a policy with a waiver of premium. This means your premiums are discontinued once you start drawing benefits.


Long-term care insurance might seem complicated, but we have the product knowledge and experience to help you pick the right policy and still reach your retirement goals. Schmerling Financial Group provides a wide range of services with the primary commitment of helping our clients pursue their unique financial objectives. We want to help you develop an overall strategy tailored to your goals, time horizon, and risk tolerance.

Let’s make a follow-up appointment to take a detailed look at the options so you can make an informed decision.



Keep in mind that the information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult a professional for specific information regarding your individual situation.