There are several things to consider when examining long-term care. First, is it necessary, or can you self-fund this possible expense with other assets? Do you have a family history of hereditary medical conditions that require long-term care? Are you risk averse and looking to mitigate this potential cost during retirement? Can you afford to pay the premiums? But perhaps most important, when is the best age to buy long-term care?
There is some debate over the best age to purchase long-term care insurance. According to the American Association for Long-Term Care Insurance, the optimal age for most people to purchase a long-term care policy is in your mid-50s.¹ AARP will tell you between age 60 and 65 is the optimal age, provided you are still in good health.² I would argue that late-40s to mid-50s is the optimal time, but that would depend on the type of policy you purchase. If you buy a policy with a lump sum payment or fixed number of premiums, purchasing earlier will result in a better rate. However, if you buy a policy with ongoing, annual premiums, you may want to wait until mid- to late-50s, so you aren’t paying premiums for decades before you need it.
Sadly though, clients that wait past age 65 may find that the window to buy this protection has closed. Similar to life insurance, a person must qualify for coverage through underwriting in order to purchase a policy. And if there are health concerns, past surgeries, physical therapy, pre-existing conditions, or other health-related red flags, the insurance carrier may decline the application for coverage.
When we work with clients on retirement planning, the discussion normally includes long-term care expenses. This topic is often initiated from the client because they may have heard the statistics or witnessed a friend or family member grapple with long-term care needs. Or, we broach the subject in a meeting as a possible concern. You may wonder why this is such an important discussion, so I’ll share some statistics with you.
Approximately 70% of people 65 and older will require long-term care. Women average 3.7 years and men average 2.2 years of care. And this care doesn’t come cheap nor is it covered by Medicare. Depending on the type of facility and care needed, costs can range from $4,500 per month to over $9,000 per month.³ That can quickly deplete retirement nest eggs, create a financial burden for a spouse or family members, and may limit care options. For these reasons, we discuss long-term care with our clients to see if it’s a risk that needs to be covered.
While you may have the money to pay for LTC insurance, it’s your good health that allows you to buy it. ¹ The better your health, the better the discounts and rates that you may pay. Long-term care insurance costs don’t decrease as we age; instead, those rates just increase each year you delay. That’s why it’s never too early to start examining long-term care insurance options, and whether it’s something you need. To learn about the different long-term care insurance options or to see if you can qualify, call our offices to talk to a financial professional. We are here to help with all your retirement planning needs.
² https://www.aarp.org/caregiving/financial-legal/info-2019/when-to-buy-long-term-care-insurance.html
³ https://www.talktomira.com/post/what-to-know-about-long-term-care