Your Money: Long-term care insurance

Your Money: Long-term care insurance

By Juergen Selk

By Juergen Selk

Financial Consultant

Your Money

Long-term care insurance

Question: I am 57 years old and still working. My retirement assets are in pretty good shape, but I wonder if I need long-term care insurance.

Answer: Studies show that one out of every two people will need some form of long-term care eventually, and nearly two in every five elderly individuals will require nursing home care at some time. A year’s stay in a nursing home can cost $60,000 or more ($73,000 in metropolitan areas), and the average nursing home stay is three years. So you could face unplanned expenses of at least $180,000—expenses not covered under major medical plans or Medicare.

There is an affordable alternative to paying these expenses out of your own pocket. Purchasing a long-term care insurance policy, the annual premium of which may cost less than one month’s stay in a nursing home, could help you protect your assets and give you the freedom to choose the type of care you want.

From a financial standpoint, the best candidates for long-term care insurance usually are retired or preretired individuals between the ages of 55 and 65 with at least $150,000 in assets to protect. Those under age 55 may be interested in purchasing long-term care protection for their parents or for themselves, since the price may be lower at a younger age.

The cost of a plan—in terms of annual premiums—plays a large role in determining what type of long-term care coverage is best for you. A range of policies is available, designed to fit a wide variety of pocketbooks. Comprehensive plans can provide coverage for nursing home care, assisted living facilities, home care and community-based care. You can lower premiums by selecting a more limited plan. Your choice of the daily benefit amount, the benefit period and the “elimination” period, which is like a deductible, will also affect the cost of your plan.

Some companies offer inflation protection riders that increase your daily benefit amount. The best inflation protection, especially for buyers in their 60s or under, increases the daily benefit amount by 5 percent a year, compounded annually.

Tax laws consider premiums for qualified long-term care policies a medical expense. Therefore, if your non-reimbursed medical expenses, including your long-term care premiums, exceed 7.5 percent of your adjusted gross income, you can deduct all or a portion of your premiums. Benefits paid by long-term care services are not taxable as income.

Juergen Selk is a financial consultant at Salomon Smith Barney in Rockford. Salomon Smith Barney does not offer tax or legal advice. If you have an investment or finance-related question, send it to The Rock River Times or to!

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