Topic of the Month: December 2009
Why LTCi Belongs in Retirement Planning

When it comes to planning for retirement, people typically know where they'll get the money to pay for living expenses and many of the extra things they want to do. But all too often, they don't devise a plan that addresses long-term care expenses. And that has the potential to derail their retirement dreams.

Consider the facts:

• Long-term care services are expensive. Based on Mutual of Omaha's Cost-of-Care Survey, the national average for care provided by a home health aide can be more than $39,000 per year (based on $19 per hour, eight hours per day, five days per week, 52 weeks per year). The most costly type of care is provided in a nursing home. People can expect to pay more than $64,000 per year. And that's just for one person. If both husband and wife need long-term care services, a retirement nest egg can be quickly depleted.


• Many people mistakenly believe their health insurance will cover their long-term care expenses or they plan to let the government take care of them. In reality, health insurance doesn't cover long-term care. And the coverage provided by government programs is limited. For example, Medicare provides some short-term coverage simply to help people recover from an accident or illness. And while Medicaid does pay for long-term care services (typically nursing home care), it only pays for people who have no other resources. And that may mean spending down assets to qualify.

This can have a significant impact on a retirement plan
People who pay for long-term care services using retirement assets often must deplete assets that have been earmarked for other purposes. In addition, liquidating assets can trigger additional costs in the form of capital gains tax, income tax and potential surrender charges.

Long-term care insurance can help
Using a long-term care insurance policy can be a smart way to help people protect their retirement nest eggs. For a fraction of the cost of paying for long-term care services, they may be able to keep their retirement savings intact so they can use the funds the way they were intended.