Do Boomers Near Retirement Need Long-Term Care Insurance?

Saving for retirement it can be daunting at best—and in a country where access to quality health care is no guarantee for the elderly, a 401(k) alone may not help.

Approximately 70% of Americans over age 65 will need access to assisted living care, according to But with assisted living costs averaging $54.00 per year, retirees may find it difficult to cover without planning ahead. That’s where long-term care insurance comes in.

Long-term care insurance provides tax-free reimbursement or cash to cover the costs associated with assisted living, including care facilities, skilled nursing and personal care assistance.

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“Long-term care insurance is designed to protect someone who eventually needs care in an assisted living facility or nursing home,” says Tom Kelly, an employee benefits specialist and director of health consulting firm Buck. “A lot of people think Medicare covers them, but that’s not the case in our current ecosystem.”

The Long-Term Care Insurance Association of America found that only 3% of the US population has long-term care insurance. Kelly highlights this as a poor retirement strategy and works with employers to add long-term coverage to their benefit offerings. He notes that 20 years ago, long-term care was a popular benefit in the marketplace, but workers ended up feeling it wasn’t worth the money — either because they didn’t actually need long-term care or because the cost of care itself it was not comparable to the high annual premiums.

Now, however, most long-term care policies are sold in combination with life insurance, Kelly explains. If the member requires long-term care, the insurer will provide coverage for the cost of care while setting aside the maximum possible amount for its beneficiaries after the person dies.

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“Unlike the previous use-it-or-lose-it era, 85 percent of long-term care sales are through hybrid products,” Kelly says. “Either you get a death benefit or you’re going to use the long-term care benefits.”

Thirteen states, including California, Illinois, Michigan and New York, are considering universal long-term care coverage. Washington has already adopted a public long-term care trust, taxing each employee who lives in the state at 58 cents per $100 of income. But individuals who apply to use the benefit can receive a maximum total of $36,500 after working and contributing to the public fund for 10 years.

Kelly points out that $36,500 is simply not enough, especially since the average man will need caregiving assistance for 2.6 years and the average woman will need it for 3.5 years, with costs totaling more than 50 000 dollars per year. Washington residents could opt out of being taxed for the state program, but had to buy their own qualified long-term care insurance policy until November 2021.

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“We saw a huge number of employees running to the open market because they felt they could get better value,” Kelly says of the trends in Washington state. “We’ve had clients where 60 percent of their employees took the employer-sponsored plan, when normally we see only 5 percent to 10 percent enrolling.”

Still, the public safety net can at least help retirees covering expenses, especially for those who feel they cannot afford additional insurance premiums. It’s important to note that for a single man aged 55, their long-term care premiums are around $2,220 per year, while single women are likely to see premiums around $3,700 per year, according to financial technology company Smart Asset. Premiums can increase with age and changes in health.

On the bright side, not every worker is necessarily in a rush to buy a policy right now. The Long-Term Care Insurance Association of America recommends Americans start buying a policy when they turn 52 — which is hopefully a more financially stable point in workers’ careers.

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Kelly still advises employers to consider long-term care as a vital component of a holistic approach financial well-being package. Otherwise, he fears, employers and employees are underestimating the cost of retired life.

“Most employers have invested heavily in retirement readiness, but without long-term care coverage, you’ll have to tap into your retirement [savings]” says Kelly. “Long-term care is key to protecting your retirement assets and financial well-being.”

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