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“It’s protecting yourself against having to do, in essence, a fire sale of all your assets,” says Zach Chamberlain, a Louisville, Kentucky-based wealth planner at money management firm Baird. “You don’t want to have to liquidate assets that you weren’t planning on selling yet or sell a home to continue to pay for long-term care.”
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It also helps avoid placing an undue burden on adult children. Having a long-term care policy that allows you to pay for care and gives you the option of getting care outside your home — if needed — can make things easier on those caregivers, Chamberlain says. “The insurance isn’t necessarily just protection for the older person getting sick, it’s also making sure the burden isn’t too heavy on [your loved ones] that are there to help out.”
“Having some insurance to pay some of the costs is a way to get the care that you need without turning your family members into your unpaid caregivers,” says Jesse Slome, executive director of the American Association for Long-Term Care Insurance. “Some coverage is always better than none. People [make the mistake of] looking at long-term care insurance and think of it as all or nothing.”
Most boomers typically have other assets they can draw upon to make up the difference if their policy doesn’t cover 100 percent of the costs.
That’s why you should limit splurging too much in the early years of retirement. Health care and related caregiving costs will cost more in your 80s and 90s.
In 2021, the most recent year for which data is available, the national median cost for a private bed in a nursing home was $108,405 a year, according to Richmond, Virginia-based Genworth, which sells long-term care policies. A yearlong stay in your own room at an assisted living facility runs $54,000. It will cost even more for those who prefer to get care at their own home with a health aide: $61,776. Keep in mind that Medicare doesn’t help with these costs, only short-term rehabilitation after a hospital stay.
Those are big numbers. However, boomers who socked money away in their 401(k) plans at work for at least 10 straight years had an average account balance of $400,000 at the end of September 2023, according to Fidelity Investments.
And savers who have been in the same employer-sponsored retirement savings plan for 15 or more years have close to $500,000.
The longer you wait to purchase a long-term care policy, the more it will cost you. For a 55-year-old man, the annual premium with an inflation rider that boosts benefits by 3 percent each year is an estimated $2,075 a year, according to the 2024 price index from the industry association. The cost to that same man who waits until 65 to purchase a long-term care policy will jump about 51 percent to $3,135 a year.
Despite the higher monthly premium, the man who purchases a long-term care policy at age 65 will save $4,850 in total premiums by age 80 compared to a man who purchased one at age 55.
If a woman buys a long-term care policy with that 3 percent annual inflation adjustment at 65 rather than at 55, her premiums will increase around 43 percent to $5,265 a year. But she’ll save $13,525 in premiums through age 80, according to the association.
Because in general women have longer life expectancies, they pay more than men every step of the way when not part of a couple — from $135 more a month at age 55 to as much as $178 more a month at 65, according to the association.
If you delay too much, premiums could rise steeply, or insurance companies could reject you. A 65-year-old couple waiting until age 75 to get coverage would see their premium nearly double, a 91.9 percent increase, according to the insurance association. Seeking coverage at age 70 or older also reduces your odds of getting covered at all by nearly 50 percent.
“Most people focus on cost,” Slome says. “The single most important factor if you’re going to look into long-term care insurance or buy it is your health.”
The reason: Many people are unable to qualify for coverage because of the discovery of ailments that are treatable.
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“Long-term care insurers aren’t concerned that you’re going to die,” Slome says. “They’re concerned that you’re going to live a long life and, thus, [will] need care.”
The optimal age to shop for a long-term care policy, assuming you’re still in good health and eligible for coverage, is between 60 and 65, financial advisers say. Why? This Goldilocks age range is not too young and not too old. A still-affordable monthly premium coupled with a total savings is a winning combination.
Health & Wellness Dental insurance plans for members and their families See more Health & Wellness offers >However, waiting until age 65 is a gamble, financial planners caution. Anyone could be rejected because health or medical-test results indicate a high probability of problems that might lead to a need for long-term care.
“By waiting, you are betting that you will stay healthy,” says Michael Foguth, founder and president of Foguth Financial Group in Brighton, Michigan. “It’s a calculated risk.”
If your health is OK and you don’t have hereditary problems that insurance companies don’t like, it makes sense to start conversations with your financial adviser in your 50s about the age at which you should buy long-term care coverage and what the costs might be, says Nicole Birkett-Brunkhorst, a senior wealth planner at U.S. Bank Private Wealth Management in the St. Louis area. For most people, it makes financial sense not to wait beyond 65 to get coverage.
“Typically, once a client is in their mid-60s, this is when we’re really being intentional with these conversations to get them to move forward,” Birkett-Brunkhorst says. “Since health care costs, inflation and longevity can make or break a financial plan, you need to have a funding plan” for long-term care insurance.
Be aware: Long-term care insurance premiums can increase through the years. But an insurer must get approval from a state’s regulators to raise the premium, something that doesn’t happen with other insurance, such as for your house.
Long-term care insurers have been imposing significant rate hikes for about a decade, and the number of insurers offering this type of coverage has shrunk. That’s why it’s important to huddle with your financial adviser and map out a plan that takes rate increases into consideration, so you’re not forced to cancel the policy after you’ve paid premiums for years.
When Ryan Graham, a financial adviser at Altfest Personal Wealth Management in New York City, evaluates a client’s need for long-term care insurance, he first does an analysis to determine if a client has enough assets to pay for long-term care out of pocket.
