Long Term Care Planning
By: Duane J. Silbernagel
With retirement just around the corner for many, I wanted to take the time to discuss an often over-looked financial risk associated with long-term care. Some may have heard of, or experienced, the position I’m about to describe:
Aging parents are starting to need assistance – feeling obligated to help them;
Just finished paying off college for the youngest child; Considering retirement in a few years.
Any wonder why this is called the “sandwich generation?” Your children may not be out of the house yet – or they’ve left and then come back – and you need to help with your own parents as well, for any reason. How does one manage to balance the potential financial obligations that come with children and parents? It’s a relatively safe assumption that very few actually dream of spending their retirement years taking care of aging parents or supporting grown children. What is the plan when the individual needing care is looking back in the mirror?
Every individual has a long-term care plan, whether they know it or not: life savings. Let’s just start with defining what long-term care (LTC) is. Simply put, LTC is any support or service needed, generally stemming from a health condition. Long-term care encompasses a wide variety of levels in care:
* Skilled care. This is the most extensive level of care. Usually given on a daily basis by licensed medical staff.
* Intermediate care.
This is care that is given by licensed medical staff, but on a basis that is not as frequent as skilled care (i.e., weekly).
* Custodial care.
Generally the most informal level of care. This type of care is usually administered by family aiding in daily activities, such as dressing or eating.
How do we address general risks? There are several approaches that can be taken. Below are four basic ways to address a risk:
Avoid the activity that creates the risk.
Reduce the risk by modifying the exposure to it.
Transfer the responsibility for it (generally in exchange for some monetary amount). This is the general premise around an insurance policy.
Decide to self-pay for any costs that arise if and when they occur.
What is the best approach? There is never a one size fits all solution. A combination of these approaches could be implemented.
What do these mean in reference to LTC? It is basically impossible to avoid LTC risks because we cannot predict the future. One can potentially reduce the chances, by eating healthy, exercising or avoiding hazardous conditions. Another common way to address what may happen in the future is purchasing an insurance policy that covers the expense of LTC. Insurance will transfer some of the financial burden to the insurance carrier – subject to the terms of the individual contract. Keep in mind, however, that these insurance policies can be expensive. Finally, one can simply decide that they will take the risk they won’t need this type of help for themselves or someone close to them, and will just pay for it out of pocket if it does happen.
No one knows what the future holds. Having a plan for how you will deal with LTC expenses if you do end up needing assistance can affect the type of services you or a loved one are able to receive if they are ever needed.
If you’d like to find out more about me, this topic or have an idea you’d like me to write about or would simply like to contact me – visit my website: www.duane.wrfa.com.
Thank you for reading.
This article is meant to be general in nature and should not be construed as investment or financial advice related to your personal situation. Waddell & Reed does not provide legal or tax advice. Please consult with a professional regarding your personal situation prior to making any financial related decisions. Insurance products are offered through insurance companies with which Waddell & Reed has sales arrangements.
Duane Silbernagel is a Financial Advisor in Lincoln City, Oregon offering securities through Waddell & Reed, Inc., Member FINRA and SIPC. He can be reached at (541) 614-1322, via email at DSilbernagel@wradvisors.com.
Waddell& Reed is not affiliated with www.newslincolncounty.com website and is not responsible for any other content posted to this website. (03/15)