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January 14, 2022

Long-Term Care Insurance: Four Things to Consider Before Buying a Policy
Alli Thomas

If you’re approaching retirement, you’re probably aware that there’s a good chance you’ll someday need long-term care. The U.S. Department of Health and Human Services estimates that over 70% of adults that live to 65 will need long-term care of some kind. 

There are two key details about long-term care that everyone thinking about retirement needs to know: 

  1. Long-term care is expensive. In 2020, average costs ranged from $4,300 per month for a one-bedroom unit in an assisted living facility to $8,821 for a private room in a nursing home. And these sums are almost certain to grow every year. 
  2. Most long-term care costs aren’t covered by Medicare or other health insurance plans. Unless you qualify for Medicaid assistance, you’ll have to pay these costs out of pocket unless you plan in advance. 

Planning for long-term care costs is even more important if you’re married. If one spouse becomes ill and must go into a nursing home, the healthy spouse may have to go back to work to keep the cost of long-term care from eating up all of their retirement savings! 

Buying a long-term care insurance policy is one of the most common solutions. These policies aren’t cheap, however, so it’s important to have the right information before deciding. 

Read more: What are the Chances That You’ll Need Long-Term Care?


Here are four things to think about before buying a long-term care insurance policy:

1. Younger isn’t necessarily better. According to the AARP, the average long-term care premium for a healthy 55-year-old couple runs about $2,100 a year. For a healthy 65-year-old couple, it’s about $3,700 a year.

While that’s a significant price difference, not paying that premium for a full decade means that by the time this couple reaches age 75, they will have spent $5,000 less if they bought at age 65 than 75. 

Putting off buying long-term care insurance until age 65 may seem risky and you might be worried about developing a serious health problem before then that could disqualify you from coverage. However, long-term care claims are far more likely to be filed by people over 70. If you’re in good health, you may be able to save money by holding off on buying a long-term care insurance policy until you’re older.

2. Look into a hybrid long-term care annuity. This type of policy links a deferred fixed annuity with a long-term care rider.

These products have become more popular recently as standalone long-term care insurance premiums have shot up dramatically. Also, most insurers no longer offer traditional long-term care policies. 

Hybrid long-term care annuities have benefits both owners and beneficiaries. Policy owners can take out money at any time. And if long-term care is never needed, the annuity may be left to beneficiaries without having to go through the probate process. 

3. Consider opening a health savings account (HSA) if you have a high deductible health plan, especially if don’t qualify for (or can’t afford) long-term care insurance.

An HSA helps you save money to cover medical expenses — and saves you money on taxes in the process. The contributions you make to your HSA reduce your taxable income and earnings in the HSA grow tax-free. And when you take money from the HSA to pay for qualified medical expenses (including long-term care), those withdrawals are tax-free as well. 

4. Speak with a financial advisorBecause long-term care is such a significant potential expense, it’s important to be aware of all available options, how each can help protect your retirement, and which one best matches your retirement goals.

If you’re concerned about long-term care costs in retirement and don’t have a financial advisor to speak with, we can help. One of our experienced financial advisors can help you put together a retirement plan that helps manage long-term care expenses for you and your family. Get started today by requesting a complimentary, no-obligation conversation about your retirement plan. 

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