Long-Term Care: The Financial Building Blocks
According to the Federal Interagency Forum on Aging Related Statistics (2000), baby boomers will begin to retire in 2011. Many of this generation are currently in their peak earning years and are actively saving for retirement. For them, preparing for the possibility of long-term care has become an increasingly important aspect of building financial security.
Also dubbed the "sandwich generation" because of the common trend that finds many with the dual responsibilities of caring for dependent children and aging parents, baby boomers are looking ahead at the trend of increased longevity and preparing for the possible financial responsibilities. Medicare does not cover long-term care and Medicaid, which varies by state, has strict eligibility requirements that limit assistance to those with financial resources below specified levels.
Given the limited public funding options, many are turning to long-term care insurance as a financial resource to pay for long-term care needed as a result of a catastrophic or chronic illness. As with most types of insurance, it is cost-effective to obtain coverage before you need it. If you wait until a chronic health condition develops, you may be considered uninsurable or the cost of coverage could be prohibitive.
With many policies covering home-based care, as well as stays in assisted living/residential care facilities and nursing homes, many pre-retirees consider long-term care insurance an important component of their retirement plan. Paying such long-term care expenses out-of-pocket could exhaust their retirement resources and interrupt their wealth preservation plans, which often focus on leaving a legacy for children and grandchildren.
Another concern for many is the likelihood that the need for long-term care could arise before retirement. Could you pay for the cost of long-term care out-of-pocket if you suddenly required it?
The Federal Perspective
In 2000, the Long-Term Care Security Act became law creating the Federal Long-Term Care Insurance Program, which offers long-term care insurance as part of its benefits package to federal employees and qualified members of the "Federal Family," such as uniformed service personnel. This legislation emphasizes a trend toward placing the initiative of preparing for long-term care more on the individual and less on public programs like Medicaid.
For anyone planning for retirement, the potential need for long-term care and its financial implications should be a consideration. With early planning and financial preparation, pre-retirees are looking to alleviate the potential burden of long-term care expenses and responsibility from their children, as well as pave the way for receiving their choice of quality care if and when the need arises.