There are certain retirement expenses most people know to budget for -- housing, food, and healthcare, to name a few. But there's one retirement expense far too many people overlook. And failing to plan for it could seriously upend your finances.
Don't neglect to plan for long-term care
A lot of people assume that Medicare will cover long-term care expenses like home health aides, assisted living, or nursing homes. But Medicare will only pay for care that's medical in nature. The aforementioned costs tend to fall under the umbrella of custodial care, which means you may need to cover them all on your own.
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The latest data from CareScout and Genworth puts the average cost of long-term care as follows:
- Home health aide-$77,792 a year
- Assisted living-$70,800 a year
- Shared nursing home-$111,325 a year
- Private nursing home-$127,750 a year
If you end up needing long-term care for an extended period of time, you could risk depleting your retirement savings. And that still may not be enough money to pay for the care you need.
That's why it's so important to have a plan for long-term care. And while you could talk to loved ones about stepping in to provide that care, you may want an additional backup plan in the form of long-term care insurance. A long-term care insurance policy could help defray the cost of the services above, easing the burden on your finances as well as your loved ones.
Don't wait too long to get long-term care insurance
It's hard to pinpoint the best time to buy long-term care insurance. Do it too soon, and you'll end up paying those premiums a really long time. Wait too long, and you risk facing cost-prohibitive premiums if your health declines.
Many financial experts agree that the optimal time to shop for long-term care insurance is during your 50s. At that stage, you may be more likely to secure a reasonable premium rate based on your health. At the same time, that doesn't leave you paying those premiums for too many years.
But don't assume that you've missed the boat if you're already in your 60s and didn't buy long-term care insurance in your 50s. You may still, depending on your health, be able to find a policy whose premiums you can swing.
And if you're worried about paying those premiums, here's one option you may find useful. You're allowed to use funds in a health savings account to pay for long-term care insurance premiums. So if you have a balance you've carried over through the years, that could be a great way to put it to good use.
Even if you decide that long-term care insurance isn't right for you, it's important to have a long-term care plan rather than wing it. You never know what sort of turn your health might take, and you don't want to end up in a situation where you risk financial ruin because of it.
