Should I buy long-term care insurance before retirement?
As you approach retirement, the importance of comprehensive financial planning becomes increasingly evident. That's because there are lots of expenses to cover after you're done working, from basic living expenses to travel, entertainment and healthcare, and if you aren't financially prepared for these costs, the strain on your budget can cause big issues after you stop working.
One often overlooked aspect is the consideration of long-term care costs. However, these expenses are important to calculate as part of the retirement planning process. After all, those aged 65 and older have nearly a 70% chance of needing some type of long-term care services in their remaining years.
That's where long-term care insurance comes into play. Long-term care insurance can help you pay for the cost of getting help with activities of daily living (ADLs) such as bathing, dressing or eating — and it can also help pay for nursing home care, assisted living or home care. While it may seem premature to think about potential health issues during retirement, purchasing long-term care insurance before retirement can offer a multitude of advantages.
Find out more about your long-term care insurance options here.
Should I buy long-term care insurance before retirement?
There are many reasons why it makes sense to buy long-term care insurance before retirement. Here are a few:
You're more likely to qualify for coverage
Insurance companies typically require applicants to be in good health in order to qualify for long-term care insurance. And, the older you are, the more likely you are to have health problems that could disqualify you from coverage.
Health uncertainties can arise at any age, of course, but waiting until retirement to secure long-term care insurance could increase the chances of being denied coverage due to health issues. Purchasing a policy before retirement, however, increases the probability that you are eligible for coverage, providing peace of mind and financial security in the event that you need long-term care services.
Explore your long-term care insurance policy options here.
Policy premiums are lower
One of the primary advantages of purchasing long-term care insurance before retirement is the potential for lower premiums. Long-term care insurance premiums are based on your age as well as your health and the amount of coverage you want — and the younger you are when you buy a policy, the lower your premiums will typically be.
By securing coverage earlier, the lower rates you lock in will save you money over the life of the policy. But as you age, premiums tend to increase, making it financially prudent to invest in coverage while you are still in good health.
It allows you to maintain a strong financial safety net
Long-term care can be financially devastating, and the costs are escalating rapidly. For example, the average national cost of a private room in a nursing home was $108,405 per year as of 2021, according to Genworth, while the average national cost of assisted living was $54,000 per year. If you face long-term care expenses during retirement, the costs could eat into your retirement funds very quickly.
However, investing in insurance before retirement allows you to build a robust financial safety net to protect your finances from future long-term care expenses. This safety net ensures that in the event of a chronic illness or disability, you have coverage in place to help cover the costs of long-term care, protecting your retirement savings and assets.
It can help preserve your independence and choices.
A long-term care insurance policy offers more than just financial benefits. It can provide you with the flexibility to choose where and how you receive care. By having a policy in place, it allows you to maintain a level of independence and control over your healthcare decisions, ensuring that you receive the care you want in the setting that best suits your needs.
A policy will relieve the burden on your loved ones.
The burden of providing and paying for long-term care often falls on family members. By purchasing insurance before retirement, you can relieve your loved ones of the financial responsibility associated with your care. This can contribute to maintaining strong family relationships and prevent your retirement savings from being depleted by unforeseen healthcare costs.
There are potential tax advantages to benefit from.
Some long-term care insurance policies also offer tax advantages, so it can be smart to purchase a policy before retirement to reap in the savings. For example, the premiums for qualified policies may be tax-deductible, providing potential tax savings that can further enhance the affordability of coverage. Be sure to consult with a tax professional to understand the specific tax implications of your policy.
The bottom line
While the prospect of needing long-term care may seem distant during your working years, planning ahead by investing in long-term care insurance before retirement can offer financial security, peace of mind and a range of benefits. Lower premiums, better chances of eligibility and the ability to build a strong financial safety net are compelling reasons to consider long-term care insurance as an integral part of your pre-retirement financial plan. By taking this proactive step today, you can help safeguard your future well-being and protect your hard-earned retirement assets.
