Is it worth it to buy long term care insurance? , Smart Change: Personal Finance

(Ryan Says)

After a lifetime of hard work, you are ready to enjoy your Golden years And live life to the fullest — without all the workplace drama or the burden of demanding deadlines. If everything goes according to plan, you will spend the rest of your life happy and healthy.

However, the experience of a lifetime may have taught you that things don’t always go according to plan. even if you are good Health Now, your circumstances may change – and you may need long-term care at some point later in life.

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Do you need long term care insurance?

According to the AARP, it is estimated that about 3 in 4 seniors will need at least some long-term care in old age. Of those, a quarter will spend at least $50,000 out of their own pocket in their lifetime. Some will pay more – Nursing homes can cost more than $150,000 per year.

Suffice to say, these costs are substantial. Unfortunately, they are not covered by medicalThis is why you can consider buying a long-term care insurance policy to help protect yourself from these expenses. Long term care insurance is offered by companies such as Genworth Financial either met Life and covers the cost of assisted living facilities, nursing home care, in-home care and adult day care.

However, long-term care insurance is also quite expensive. For example, ConsumerAffairs notes that for a 65-year-old with certain health problems, the annual premium There could be a move above $2,100. For women of the same age, the premium is even higher, at $3,100 per year.

In exchange for these upfront payments, your notional policy will cover approximately $400,000 in benefits at age 85. If you need long-term care right away, your policy will only cover benefits for more than $160,000 — barely enough for a year’s worth of nursing home care.

Do Some Math Before You Buy

Keep in mind that your insurance policy will remain active only if you pay your premiums year after year. If you start paying at age 65 and don’t need long-term care until age 85, you will have paid your long-term care insurance premiums for two decades before you can use your policy.

At this point, you would have paid more than $42,000 in premiums as a male, and over $62,000 if you were a female. If you need long-term care in a high-intensity setting for the last few years of your life, that investment may pay off.

However, it is more likely that you will not face any cost. Specifically, the U.S. Department of Health and Human Services estimates that 63% of retirees expect to spend $0 in long-term care costs in their lifetime, either because they won’t need long-term care at all or because they will. Access to alternative care provided by relatives or loved ones.

In light of this fact, it may be worth considering what would happen if you only save the amount you would have otherwise paid in premiums. Let’s say you save $2,100 a year and then invest it – Gaining 7% compound annual growth rate — Between the ages of 65 and 85 you’ll receive over $86,000 after the same 20-year period.

If you save $3,100 a year instead and manage to compound at the same rate, you’ll have more than $126,000 left, enough to cover a large portion of your long-term care costs—if they ever are. also come into effect.

To insure or not?

Long-term care is expensive. But long-term care insurance is just that – so much so that you may be better off saving and investing the money rather than spending it on insurance premiums.

Long-term care insurance may still make sense if you expect to be among the small fraction of Americans who will bear substantial long-term care costs. But the overwhelming majority of retirees who face out-of-pocket expenses that fall under the lifetime cost of insurance premiums may be better paid for care on their own.

By carefully considering your options and evaluating your health, family circumstances and financial situation, you will have a strong idea of ​​how to arrange for your health care needs in old age – long-term care insurance or not.

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