Planning for retirement takes time and understanding of the various factors that may affect your ability to avoid outliving your savings. There are several myths that abound regarding retirement, specifically health care in retirement, which often hinder people from making the best decisions people when it comes to their finances.
It’s important to be aware of these myths and recognize the reasoning behind them and the truth of the situation, instead. When it comes to long term care, there are five main myths that you need to know.
5 Long Term Care Myths
1) “Medicare will foot the bill for long term care”
This is easily the most prevalent myth that surrounds long term care planning. Nearly half of all Americans over the age of 40 believe that their long term care costs will be covered by their Medicare benefits as they age. The recent AP-NORC long term care survey found that 42% thinks Medicare pays for nursing home care and 38% thinks it pays for home care. Unfortunately, that’s just not true. Medicare might pay for some of your long term care, but only if you have a qualifying hospital inpatient stay. Even then, the government program will cover the cost of care only in a nursing home and only for an extremely brief period of time, usually no more than a month. Medicare was not designed to cover long term care and despite the common misconception, relying on it for your retirement care is a huge mistake.
2) “If I ever need care, I will just enroll in Medicaid.”
Yet another example of how people think the government will take care of them, the plan to enroll in Medicaid is not as simple as it sounds. If you have substantial assets saved for retirement, you will have to spend them down to basically nothing just to qualify for Medicaid. Don’t think you can just transfer them to a family member, either, because there are rules to prevent people from simply transferring their assets right before they need care. Unless you are prepared to deplete your savings, don’t expect Medicaid to pick up the tab for your long term care, either.
3) “My family will take care of me for free.”
If you are counting on your family to provide your long term care, have you thought it through completely? Most adult children are spread out across the country, making it hard to care for their aging parents who live states away. If they do live close by, caregivers often have to sacrifice their job, free time, and even their own money to care for a family member. It’s certainly not “free” in any aspect. What will you do if it gets to the point where you need medical care and other care that your family can’t provide? Last year’s AP poll found that most people expect their family to take care of them should they ever need help, but 6 in 10 haven’t even discussed it with those family members. The financial and emotional toll of family care giving is huge, but if that’s part of your plan, you need to at least talk about it first.
4) “I can afford to self-insure.”
This myth can be extremely damaging to your retirement portfolio. There are few people who can truly self-insure for long term care and those who can have several million in cash assets to spend in retirement. Unless you have upwards of $5 million free to use for your health care in retirement, self-insuring is not a wise move. Because inflation is so unpredictable and the cost of long term care continues to rise, saving for the cost of care now may mean you actually have very little 20 or 30 years down the road when you will actually need long term care. That’s why the Inflation Protection rider for Long Term Care Insurance is so vital; it helps grow the value of your benefits to keep pace with inflation, ensuring your policy is still worth the same amount (more, actually) when the need for care arises.
5) “I’ll buy Long Term Care Insurance in a few years.”
Thinking this way can be another big mistake. It’s not a pleasant thought, but illness or injury can strike at any time. If you are in your 50s and you don’t think you need to buy Long Term Care Insurance now, think again. A bad fall, a stroke, or a diagnosis of Parkinson’s, Alzheimer’s can quickly rule you out of qualifying for a policy. Your health is a huge factor of whether or not you are eligible for Long Term Care Insurance, so the longer you wait to buy, the higher the chances are your health will decline. The best time to buy a policy is when you are in your early 50s, so you can get the lowest rates and be sure you will medically qualify. Waiting will only cost you.
Planning for long term care doesn’t have to be an overwhelmingly complicated task, but it does take some true consideration of your risk and your finances. If you’ve found yourself saying any of these 5 sayings, it might be time to re-think your strategy and look into buying Long Term Care Insurance now.
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