It’s something almost no one likes to think about: the possibility that they might need long-term care or to move to a nursing home in retirement. Pretending declining health is not a reality won’t make it go away. Indeed, ignoring these needs can mean you end up running out of money, leaving your children and grandchildren scrambling to cobble together a workable plan—a plan that might leave you in a care facility you’d rather avoid. Almost all current and soon-to-be retirees stand to run out of money for long-term care at the 20-year mark. This frightening reality does not have to become an inevitability for you if you’re willing to plan for the future.
Consider Long-Term Care Insurance
Unless you are in dire poverty, Medicaid will not cover your long-term care costs. Nor will your health insurance policy, leaving you to foot the bill. The simplest way to avoid the misery of shelling out thousands each month in long-term care costs is to purchase long-term care insurance. These policies are cheapest when you’re young and healthy, so the best time to buy is now—not next week, not next month, certainly not next year. Your policy might cut into your paycheck or retirement fund, but not to the same degree that the exorbitant costs of long-term care might.
Know What You Might Need
Not everyone will need 20 years of intensive nursing care, but few retirees who live long enough will be able to altogether forgo care. This is where careful planning comes into play. Look at your family history for guidance. If costly diseases such as Alzheimer’s or Parkinson’s run in the family and your parents lived a long time, you may need to plan for very long-term care. Talk to your doctor, too, since he or she can give you a reasonable estimate of your health status. There are no guarantees, so talk to a financial planner about how to save more than you need—that way, if you don’t need long-term care, the extra money will be a pleasant surprise, and perhaps even the source of a cushy inheritance.
Tap Into Your Home’s Equity
If you’re already well into your retirement and shocked by the costs of long-term care, it’s not too late. If you are over the age of 62 and own your own home, a reverse mortgage can give you tax-free money to fund your retirement, long-term care, or both. You can even invest the money to help it grow, or use it to take out a costly long-term care policy. You’ll be able to continue living in your home, and don’t have to repay the loan unless you sell your house.
Talk to Your Kids
Many seniors, panicked by the notion of moving into a long-term care facility, simply hope that their kids will take them in. Others assume that, by the time they need care, their children will be financially stable enough to fund that care.
These are dangerous assumptions that can destroy your relationship with your children, throw your child’s life into disarray, and force your family to choose between severe financial distress and caring for you. Talk to your children at least once a year about your long-term plans, and if you are counting on anything specific from them, make sure you explore this explicitly. It’s not easy, but it’s the only way to keep your relationship intact while planning for the future.