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Surprise You'll Likely Need Long-Term Care Surprise You'll Likely Need Long-Term Care
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Surprise: You'll Likely Need Long-Term Care

Insights & Ideas Team •  May 11, 2015 | Your Finances

At almost every point in your life, you’ll likely need to juggle current expenses with savings. This ongoing balancing act often means that important long-term financial needs take a back seat to more pressing demands on your money.

According to Jeff Photiades, a wealth management advisor for Northwestern Mutual, this can leave your long-term financial security vulnerable to certain risks. In his experience, one of the biggest of these threats is also one of the least addressed—that’s the cost of long-term care.

“The Department of Health and Human Services (DHHS) reports that 70 percent of Americans reaching age 65 will need help with everyday living activities at some point in their lives, either because of a debilitating injury or a chronic illness, such as Alzheimer’s, stroke, heart attack or diabetes. Yet few have a plan in place to address this possibility,” said Photiades. “In fact, the DHSS has found that less than one-third of Americans age 50 and older have begun saving specifically for long-term care.”

A Concern for All Ages

If you think this issue impacts only the elderly, you’re wrong; it doesn’t.

The Department of Health and Human Services also found that of the 10 million people needing paid long-term care in the U.S., 37 percent are younger than 65.

“Chronic illnesses like Alzheimer’s and ALS can strike at any age; so can a debilitating accident or disability,” said Photiades. “Thinking back to this year’s Oscars, two of the award-winning movies, Still Alice and The Theory of Everything, were about people who suffered an illness that progressed and eventually required long-term care.”

Who’ll Cover the Cost?

Long-term care includes a broad range of personal, social and medical services provided either at home or in an assisted care or nursing home facility. It can include nursing home services as well as services for help with life’s basic tasks, such as eating, bathing and dressing.

Like many, you may believe that Medicare or Medicaid will cover the entire cost if long-term services are needed. Not so, says Photiades. “Medicare provides only limited coverage and only in specific circumstances. Meanwhile, Medicaid pays for many long-term care services, but only for those who meet the eligibility criteria with low income and few assets. Without proper planning, you could easily drain your retirement nest egg and run through a lifetime of savings, even if you’re ‘lucky’ enough to only need long-term care services for a relatively short period of time.”

Not surprisingly, more than five in ten Americans (53 percent) in a recent Gallup poll said that they feel stressed that they may not have the resources to pay medical costs due to a serious illness or accident.

The Power of a Plan

For this reason, Photiades believes that it’s vitally important for families to sit down and discuss how to cover the financial and emotional burden of long-term care needs. “Wealthier families may be able to self-insure these costs, but that typically requires more money than most Americans can afford to sock away.”

Fortunately, there are a growing number of choices to help you prepare financially for the possibility that you or a loved one may someday need long-term care. In addition to funding through insurance or other assets, newer options include certain annuity contracts and life insurance policies that can address long-term care needs.

“Most people envision themselves living a long, active life in retirement. The reality is, the longer you live, the greater the chance that you may require long-term care,” said Photiades. “A financial professional can help you see the big picture. This includes prioritizing your goals, mitigating the challenges to retirement and understanding how the potential need for long-term care could impact your assets, your family and your future.”

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