Healthcare can be the biggest expense for many retirees. This includes potential costs for long-term care services. So, a key component of your retirement plan should be a strategy for paying these types of costs. One option that is oftentimes used is long-term care insurance. But this may not be right for everyone.
Another possible route is to use annuities in long-term care planning. These financial vehicles are designed for paying out a regular income stream – either for a set time frame, or even for the remainder of your lifetime, no matter how long that may be.
Unlike stand-alone LTC insurance policies, annuities can provide you with additional benefits, too, such as tax-deferred growth. Not all annuities are the same, though, so if you plan to use these financial vehicles in your long-term care planning, it is essential to have a good understanding of how they work.
Is Your Portfolio Prepared for Long-Term Care Costs?
The cost of long-term care has risen significantly over the past couple of decades. This is the case for both facility and in-home services. According to Genworth’s 2021 Cost of Care Survey, the median cost of just one month in a semi-private room in a skilled nursing facility was $7,908 (in 2021). A private room was even more, coming in at over $9,000 per month.
While the cost of home healthcare is less, it is still pricy, with the median monthly outlay for a home health aide standing at over $5,100 (in 2021). At that rate, how long would your savings hold out if you had to pay these costs out-of-pocket… especially if you have a healthy spouse who still requires funds for rent or mortgage, utilities, food, and transportation?
Although nobody likes to think about requiring skilled, assisted, or custodial care, the reality is that the odds of needing at least some type of care are quite high. Based on U.S. government data, once someone reaches age 65, there is a 70% chance of requiring long-term care at some point during the remainder of their lifetime.
Will this be you?
Nobody knows for sure. But it is far better to plan for the worst, just in case. And a properly structured annuity can help you to do just exactly that.
How an Annuity Could Help with Paying for Long-Term Care Needs
The way people are paying for care today differs from how it was done just a few decades ago. Certainly, one method is through the purchase of a stand-alone LTC insurance policy. But because these are typically use-it-or-lose-it plans, it is possible to outlay thousands of dollars in premiums with nothing in return.
Therefore, another potential option is a “bundled” product. The premise of these vehicles is that one or more premiums can be made. Then, if long-term care is needed, a monthly payment can be received – typically without incurring any surrender, or early withdrawal, charges.
If, however, you never have a need for nursing home or in-home care services, you can still rely on the income benefits that come from the annuity. This way, regardless of what happens, your paid-in premiums will not be lost.
It is important to note, though, that not all annuities are exactly the same. Because these financial vehicles can have many “moving parts,” it is best to first discuss your specific situation and needs with an annuity specialist who can help you find a plan that is right for you.
Do You Have a Reliable Future Income Stream in Place?
If you’re still in the planning stages for retirement, it is essential that you have reliable income generation in place. Otherwise, a long lifetime and/or high healthcare and long-term care costs could put you in a position of financial struggle.
With that in mind, do you have a reliable future income stream in place that also takes into account the possible need for (and cost of) long-term care? If not, Annuity Gator can help. At Annuity Gator, our focus is on educating consumers and financial professionals on how annuities work, along with strategies for using them in retirement planning – which includes protection from long-term care expenses.
Do you have questions about how to keep your assets safe – even in the event of a costly long-term care need? If so, feel free to contact us and talk with an annuity specialist. You can reach us at (888) 440-2468, or your can email us by going to our secure online contact form. We look forward to helping you protect all that you’ve worked for.