3 Ways to Better Finance Long-Term Care
Written by
Chris Adam
Edited by
Amber Barkley
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
In many families, long-term care (LTC) isn’t a subject that’s popular to discuss. That’s why something like long-term care insurance, which helps cover care that lasts longer than a few months and involves assistance with daily activities, isn’t likely a topic that comes up often.
But paying for long-term care can become tricky. It’s also more common than many people might think — someone turning 65 today has a nearly 70% chance of needing long-term care services in the years to come, according to the Administration for Community Living.
Here’s a look at some good ways to better finance LTC, and why relying on personal funds or Medicaid may be especially risky.
Inherited IRA
Lori Martin, president of Envision Benefits and a Certification for Long-Term Care (CLTC) instructor, said an inherited IRA can be a great source of funding for an LTC insurance policy.
Purchasing an LTC insurance policy provides the financial resources necessary to pay for long-term care expenses, whether at home or in a facility. According Martin, premiums are paid from personal funds, a health savings account or by repositioning retirement or annuity funds.
Home Equity
Untapped equity in a home can fund LTC expenses with a reverse mortgage loan, according to Martin.
“Reverse mortgages allow qualified borrowers to use a portion of their home equity as a cash loan,” she said. “This loan can be used to pay for caregiving in the home, facility care or the purchase of an LTC insurance policy.”
Military Veteran Support
Martin said certain U.S. military veterans and their surviving spouses may be eligible for benefits to help cover the costs for LTC services.
To qualify for these benefits, veterans must meet both service requirements and financial eligibility requirements. The most resources for LTC assistance are provided to veterans who have service-connected disabilities.
Risky: Personal Funds and Medicaid
According to Martin, many people rely on personal funds to pay for LTC and depend on family and friends to also help with the caregiving.
“During working years, individuals plan for retirement, saving enough to ensure financial security in retirement,” Martin explained. “An extended care event can significantly impact these plans, necessitating a reduction in retirement income, adjustments to family lifestyle and the potential sale of assets.”
Martin said Medicaid serves as a safety net for individuals without assets to pay for their LTC. However, “benefits paid … are very limited. I anticipate a significant reduction in these benefits in the near future.”
More From GOBankingRates
