MEDICAID Medicaid may be available to pay for some long-term care services both at home and in the community, but it does set limits on the amount of assets you may own and the amount of income you may receive each month in order to be eligible for benefits. Coverage eligibility varies from state to state. PERSONAL SAVINGS You could plan to use your personal savings to cover any long-term care costs you may encounter, allowing you to maintain control over your assets and ensure there are no restrictions on the type of care you choose to receive. However, as stated earlier, these costs can be considerable. If long-term care costs increase, and your retirement assets shrink, you may run the risk of depleting your retirement savings, and your freedom to choose the care you need may become limited as your retirement savings are reduced. LONG-TERM CARE INSURANCE Long-term care insurance may be a more sensible option, increasing the funds you have available to pay long-term care expenses and allowing you to transfer the risk of long-term care expenses away from your current retirement assets to an insurance company. However, the insurance will come at a cost, and generally speaking, the longer you wait to purchase long-term care insurance the higher the premiums are likely to be. In addition, the premiums may not be guaranteed and could increase in later years, and if you never need long-term care, the money you spend in premiums may be lost. LIFE INSURANCE WITH DEATH BENEFITS Another option for helping to cover health care costs is a life insurance policy with accelerated death benefits. This means you may be able to utilize a portion of the death benefit while you’re living. With accelerated death benefits, the owner can accelerate a portion of the death benefit should the insured be diagnosed with a qualifying event, typically a terminal illness diagnosis. The funds can be used for any purpose the owner chooses, such as assisting with illness expenses. Accelerated death benefits are subject to eligibility requirements. An administrative fee may be required at the time of election. The death benefit will be reduced by the amount of the death benefit accelerated. Because benefits are paid before death, a discount may be applied to the death benefit accelerated. As a result, the actual amount received could be less than the amount of the death benefit accelerated. LIFE INSURANCE WITH LONG-TERM CARE AND CHRONIC ILLNESS RIDERS Some life insurance policies offer riders and benefits that can assist with unexpected health care costs. These riders allow policy owners to use a part of the death benefit to help pay for long-term care and expenses related to chronic illness. Policy charges and availability depend on the product. Long-term care and chronic illness riders are subject to eligibility and generally come with an additional cost. LONGETIVITY ANNUITY In early 2012, the Treasury Department issued several regulations to encourage plan sponsors of employer-based pension and 401(k) plans to enable retirees to use a portion of their 401(k) plan to purchase a longevity annuity. With this option, a portion of their balance would be reserved for conversion to annuity income starting later in life, around age 80 or 85. There may be no cash value on the death benefit during the deferral period; the rest of the account would be available for withdrawals for the first phase of retirement. This arrangement can assure that you have a second leg of income available should you run out midway through retirement.
:12: This document is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Individuals are encouraged to consult with a qualified professional before making any decisions about their personal situation. This content is not endorsed by the Social Security Administration, and our firm is not affiliated with the United States government or any other governmental agency. This document is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Individuals are encouraged to consult with a qualified professional before making any decisions about their personal situation. This content is not endorsed by the Social Security Administration, and our firm is not affiliated with the United States government or any other governmental agency.
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