POSTRETIREMENT BENEFITS PLANNING – VOLUME 3
Special Retirement Planning Bulletin
Nursing Home Benefits
One benefit that you probably didn’t have while working was a benefit that would pay for nursing home care in the event that you needed help with some of your daily living activities—like bathing, eating and dressing. This isn’t something that employers generally provide, since it’s more often the retired who need and use this coverage. This means that even though you enjoyed your working years without this benefit, it’s vital you secure it for your retirement.
Who Needs Nursing Home Benefits
Studies show us that up to 70 percent of the seniors who are currently 65 will eventually be in a nursing home. Further, we know that nursing home expenses averaged $205 per day for a semiprivate room in 2010, and they’ve only risen since. Both the expense of a nursing home stay and the likelihood that you’ll eventually have one make longterm care coverage a good choice for seniors.
Remember, this kind of stay generally isn’t covered by Medicare. There may be some cases in which you can apply for Medicaid, but insurance protection is still important in case your nursing facility doesn’t take Medicaid or you don’t qualify.
Option 1: Long-Term Care Insurance
Long-term care (LTC) insurance policies are designed to pay for some or most of the expenses associated with a nursing home stay or, depending on policy design, at-home care.
- Preexisting conditions: Certain existing medical conditions could mean that you either don’t qualify for LTC coverage or that it will be more expensive.
- Waiting periods: Policies can be designed to start paying benefits immediately or to have a short waiting period during which the patient pays for care.
- Daily benefit: Policies have a daily benefit limit for the daily cost of care covered.
- Inflation protection: As the years go on, the cost of nursing home care rises. Inflation protection allows your benefits to increase.
Option 2: Hybrid Annuity
Annuities offer a solution to seniors who want an investment tool that offers them an ongoing lifetime income. Hybrid annuities also add a variable component that you can access to pay for nursing home expenses, if you have them. If not, those funds can be used to maintain your income. For some seniors with preexisting conditions who either can’t get approved for a LTC policy or can’t afford the higher premium, an annuity can be a better choice.
Option 3: Permanent Life Insurance
Permanent life insurance policies accrue cash values that can be used to pay for nursing home expenses. If the insured has no nursing home expenses, they can instead use that cash to supplement their retirement income.
In the next volume of the POSTRETIREMENT BENEFITS PLANNING series, we discuss death benefits, how they work and how they ensure benefits to your heirs.