Health care is one of the largest expenses in retirement, so it’s important that your plan includes how to handle medical expenses — expected or unexpected — as you age. One aspect of health care that’s often overlooked is planning for long-term care. Long-term care expenses can be substantial and, contrary to what you might think, are generally not covered by Medicare.

Unlike traditional medical expenses, which focus on treatment, long-term care generally provides assistance with everyday activities such as eating or bathing. You may need assistance if you suffer an injury like a broken hip, an illness or a stroke, or you may also need help because of cognitive impairment, such as Alzheimer’s disease or other mental illness.

When to start planning for long-term care

While long-term care services are typically needed later in life, we recommend starting between ages 50 and 60. Planning early can provide you with more options and higher confidence as you enter your retirement. This is particularly important if you decide to use insurance, since:

  • Your health may be better so you may be more likely to obtain coverage at lower premiums.
  • You’ll have more time to spread premiums over time.
  • You may still be working and able to afford premiums more easily.

If you’re wondering whether you’ll actually need long-term care, for many the answer is probably yes. According to a report from the ASPE, about 50% of individuals will experience a long-term care event over their lifetime. And if you suffer an event, it might not necessarily be short-lived. For example, 40% of events tend to last more than three months, 25% for over a year and 15% for more than three years.1

Options for financing long-term care

We recommend planning for $150,000 (in current dollars) of care as a starting point. This estimate considers three years of long-term care, assuming you start with part-time in-home care and progress to a nursing home. From this starting point, you can adjust the amount needed based on your individual circumstances, such as your expected longevity or the costs of care in your local area.

Once you’ve determined the amount to plan for, it’s important to understand what potential solutions may be available to you. The three main approaches to address the risk of significant long-term care expenses are:

  • Accepting the risk by planning to self-pay for any long-term care costs (self-insuring)
  • Transferring the risk by purchasing an insurance policy
  • Sharing the risk by combining self-insuring with an insurance policy

So, which option may be right for you? This will depend on your particular situation, such as how long you are planning to need care, your flexibility to use assets or reduce spending to cover care, or whether you can comfortably afford insurance premiums.

You may also want to consider spousal/partner planning alongside your significant other. Will you insure one partner or both? How much coverage will you elect for each? Your Edward Jones financial advisor can simulate multiple scenarios showing different coverage options that will help you better understand what makes the most sense for you and your loved ones.

How Edward Jones can help you plan for long-term care

With long-term care, there are several factors to consider and discuss with your loved ones as you enter retirement and beyond. The risk of a long-term care event is fairly likely, and the need can be significant, so we recommend everyone put a plan in place in case they need care. An Edward Jones financial advisor can help you figure out how much long-term care may cost you and discuss the options to cover these costs.

Important information:

1 Source: “What Is the Lifetime Risk of Needing and Receiving Long-Term Services and Supports?” ASPE Research Brief, April 2019

Edward Jones is a licensed insurance producer in all states and Washington, D.C., through Edward D. Jones & Co., L.P. and in California, New Mexico and Massachusetts through Edward Jones Insurance Agency of California, L.L.C.; Edward Jones Insurance Agency of New Mexico, L.L.C.; and Edward Jones Insurance Agency of Massachusetts, L.L.C.  California Insurance License OC24309.