What Is Long-Term Care Planning?

Imagine a situation where you or someone you love encounters a medical event that requires ongoing care. Unfortunately, as people age, this possibility can become more substantial and, often, can occur quickly and without warning. For this reason, it’s critical to ensure you have plans in place should you or a close relative need to receive long-term care.

In this article, we’ll highlight the essentials of planning for long-term care. This includes an overview of what it typically comprises, how much it costs, and effective planning strategies to ensure you’re ready financially. Finally, we’ll also outline the importance of consulting a financial advisor as you prepare to receive ongoing care.

What Is Long-Term Care?

Long-term care is an arrangement that involves ongoing medical care and treatment for individuals with a range of disabilities, illnesses, and conditions. These could be for injuries or conditions brought on by age. Care may occur within your home, called home-based care, or, under other circumstances, within a medical facility, such as a nursing home or rehab facility.

For instance, consider that a person experiences a debilitating event, such as a stroke or injury from a car accident. Situations such as these can and often do necessitate individuals to seek continuous medical care to ensure they can meet their basic needs and live a more comfortable life. While family members or friends can help, it can be a tough and complex weight on their shoulders. In that way, a person may require the expertise and close attention of medical professionals.

Below are some example causes someone may require long-term treatment:

• Advanced age
• Heart attack
• Stroke
• Cancer
• Alzheimer’s or dementia
• Serious injury

Importance of Planning Care

Planning for long-term care is crucial because of its immense financial cost. According to data from Genworth, the annual median cost of home health aide in 2023 was $75,504. Care can be even more expensive if a patient must reside in a facility, however. In 2023, median annual costs for both semi-private and private rooms in a nursing home reached over $100,000.

As outlined in the above example, health events can arise out of nowhere and can bring along with them expensive medical care that your existing insurance may not cover. Therefore, whether you’re young and still looking at your old age on the distant horizon or entering retirement age, it’s vital to prepare yourself for the unforeseeable.

Another benefit of putting together a plan for long-term medical care is that you get time to map out how you want it to look. While it’s never easy to envision a future where you or a loved one experiences life-altering conditions, planning enables you to think about your wishes and how you would like others to honor them. This is especially important if you encounter a situation that makes communicating with others difficult.

Paying for Care

There are many ways you can go about paying for ongoing medical treatment. Ultimately, though, the method you choose will be up to you based on your capabilities and preferences.

Below is a list of common sources of long-term care payments:

Personal Funds

According to the National Institute on Aging (NIA), paying out of pocket is a typical way to handle long-term care costs. This may include using money from a variety of sources, including checking and savings accounts, investments, or retirement accounts. Alternatively, individuals may sell expensive assets, such as their homes, to create a pool of cash large enough to pay for treatment.

It’s important to keep in mind, however, that paying for long-term care using your own money can add up quickly. Therefore, it’s not uncommon to use additional methods, such as the other options in this list.

Long-Term Care Insurance

Long-term care insurance is another usual way to pay for continuous medical care. This is an insurance policy that helps cover medical costs associated with long-term care.

Per LongTermCare.gov, policies come with limits on how much and what services the insurance company will cover. Be aware, as well, that some policies may run on limited lengths of time — often around two to five years — while others may last for the rest of your life.

Government Benefits

In certain cases, you can also utilize government benefits to help cover payments for long-term care. Medicaid, for example, is a federal program that helps individuals with little income. If you qualify, you could receive assistance for continuous medical care. Be sure to check with both federal and state resources to see if you or a relative could qualify for any governmental programs to lessen the amount you pay for long-term care.

How Your Care Will Look

As mentioned, a core element of planning for long-term care is ascertaining wishes and communicating them to others. While it can be difficult, try to imagine what you would want your life to look like if you had to be the recipient of constant medical attention. Ask yourself questions like, “What aspects of my life are important to me?”, “How do I want people to treat me?”, and “What powers should I give to relatives?”

After you’ve thought of what a treatment plan might look like, you can effectively communicate these wishes to your family members. A good way to do this is to write down your desires, both to strengthen your thoughts and to concretely define them for people who may end up heavily involved in your care.

Writing down wishes can be informal, but it’s also wise to create legal documents that explicitly state what you want to occur in case of a serious emergency. An advance healthcare directive is an important and related document that handles this task. Specifically, it outlines your desires upon your incapacitation and what powers others have on your behalf.

Value of a Financial Advisor

When outlining plans for long-term care scenarios, it’s a good idea to consult the expertise of a financial advisor. Paying for care can be highly complex, expensive, and include lots of sources within your holistic portfolio. In that context, an expert will be able to aid you with designing payment strategies that comfortably leverage various sources and assets.

Because they’ll have gained an understanding of your financial situation, they’ll be able to help you make informed decisions on how to handle large payments and sums. For instance, an advisor may be able to decide which accounts to use or assets to sell to fund ongoing treatment.

If you would like to find a financial advisor, we recommend using this free matching tool. After completing a quick set of questions about your goals and situation, it will match you to a reputable expert who has the skillset you need.

Frequently Asked Questions

How long do long-term care insurance policies last?

Long-term care insurance policies tend to vary in length. Some may last for a specifically defined set of time, such as two to around five years. In other cases, policies could remain in place for an unlimited period. According to LongTermCare.gov, though, this is fairly uncommon, and the former is more likely.

Can family get paid for taking care of a relative?

Depending on your state’s laws, family members may be able to become paid caregivers for other relatives. We recommend visiting your state’s government website or contacting a legal professional to see if this is viable.

How do people usually pay for long-term care?

While insurance is a common strategy, Vanguard data shows that most individuals pay for ongoing care using their personal funds, including accounts such as checking and savings and retirement plans (401(k)s, IRAs, and Roth IRAs).