IntroductionThe vast majority of retirees need long-term health and general care services, but very few have an actual plan in place for this. This failure to plan, not only impacts one’s own finances, but also puts family caregivers in a potentially harmful position. Remember, there is a high possibility of you falling ill during your retirement years so without proper planning, the burden of long-term care is often shifted onto family members.
What you need to considerFar too many people think that all there is to a long-term care plan is traditional long-term care insurance. Setting up a long-term care plan isn’t just about budgeting for expenses, or funding the risk through along-term care insurance. To properly plan for long-term care the following things have to be considered:
- The type of care needed
- Who will provide the care
- How you want to receive care
- How will care be financed
Impacts on Caregivers and Family MembersOften the emotional burden of dealing with an ill family member is exasperated by the financial burden on top of it. A lack of planning by the future retiree means the unprepared family member is forced into covering the role of caregiver and few actually have this conversation with their children or spouse.
Quantifying the Costs of Long-Term CareThe cost of long-term care varies with location, medical history and age. In most instances, however, responsibility for providing care still falls to spouses and children. As you develop a long-term care plan, make sure you consider the negative financial impacts this might have on them. Consider: Will your family caregiver have to leave the workforce? Will they have to pay for certain expenses out-of-pocket? By considering your plan may include setting aside funds to offset lost wages or out-of-pocket costs for your family caregiver to help relieve their financial burden.
Funding Long-Term CareThere are a variety of ways to fund the cost of long-term care. The most obvious choice is to self-fund. This means you set aside the projected costs in investments and savings, likely as part of your retirement planning. One additional option is to rely on the benefits provided by your medical aid. Just note though that medical aid alone typically leaves the individual with less control over the type of care he or she receives. For example, your medical aid may not cover costs in an assisted living facility, and generally wont cover room and board in an assisted living facility, but could cover some care costs.
ConclusionTaking the time to set up a plan for long-term care gives your family members and caregivers the permission to make decisions and spend money to get you the care you need. Without setting up a plan ahead of time, the burden is shifted to the family caregiver to make decisions about how to fund care and how to provide care. While transferring some portion of the financial risk to an insurance company provides peace of mind, instant liquidity, financial leverage, tax advantages and care coordination services, a properly set up plan is not just about the specific product or funding mechanism you utilise but your quality of life and the family caregivers you are protecting. Remember
Most of all keep the communication channels open with family members, retirement is easy, getting old is scary, but if you prepare and plan and involve those around you with your plan a massive burden is lifted off you personally and those closest to you.