Are
you prepared for the possibility – and expense – of eldercare?
Provided by Taylor McClish
Do you have an extra $33,000 to $100,000 to spare this
year? How about next year, and the year
after that? Your answer to these questions is probably “no.”
What could possibly cost so much? Eldercare.
According to the AARP Public Policy Institute, a year of in-home
care for a senior costs roughly $33,000. A year at an assisted living facility?
About $45,000. A year in a nursing home? Approximately $100,000.1
Medicare has limitations. Generally speaking, it will pay for no more than 35 hours
per week of home health care and only up to 100 days of nursing home care, following
a hospitalization. It may pay for up to six months of hospice care. If you or
someone you love happens to develop Alzheimer’s disease or another form of
dementia, Medicare will not pay for any degree of room and board for them at an
assisted living facility.2
Medicaid is another resource entirely. For seniors who are
eligible, Medicaid can pick up assisted living facility or nursing home
expenses, and even in-home eldercare, in some instances. Qualifying for
Medicaid is the hard part. Normally, you only qualify for it when you have
spent down your assets to the point where you can no longer pay for eldercare
out of pocket or with insurance.2
An extended care strategy may factor into a thoughtful
retirement strategy. After all, your
retirement may be lengthy, and you may need such care. The Social Security
Administration projects that a quarter of today’s 65-year-olds will live past
age 90, with a tenth making it to age 100.1
Insurance companies have modified extended care policies over the
years. Some have chosen to bundle extended care features into other policies,
which can make the product more accessible. An insurance professional familiar
with industry trends may be able to provide you more information about policies
and policy choices.
Waiting for federal or state lawmakers to pass a new program to
help with the costs of eldercare is not much of a strategy. It is up to you,
the individual, to determine how to face this potential financial challenge.2
If you lead a healthy and active life, you may need such care only
at the very end. Assuming you do require it at some point, you may consider
living in an area where you can join a continuing-care-at-home program (there
are currently more than 30 of these, essentially operating as remote care
programs of assisted living communities) or a “village network” that offers you
some in-home help (not skilled nursing care, however).1
Those rare and nice options aside, retirement saving also needs to
be about saving for potential extended care expenses. If insurance addressing
extended care is not easy to obtain, then a Health Savings Account (HSA) might
be an option. These accounts have emerged as another solution to extended care
needs. An HSA is not a form of insurance, but it does provide a tax-advantaged
savings account to which you (and potentially, your employer) can make
contributions. You can use these funds to pay for most medical expenses,
including prescription drugs, dental care, and vision care. You can look into
this choice right away, to take advantage of savings over time.3
Once you reach age 65, you are required to stop making
contributions to an HSA. Remember, if you withdraw money from your HSA for a
nonmedical reason, that money becomes taxable income, and you face an additional
20% penalty. After age 65, you can take money out without the 20% penalty, but
it still becomes taxable income.3
An HSA works a bit like your workplace retirement account. Your
employer can make contributions alongside you. However, the money that you
contribute comes from your pretax income and can be invested for you over time,
so it may grow as your contributions accumulate.3
There are also some HSA rules and limitations to consider. You are
limited to a $3,500 contribution for 2019, if you are single; $7,000, if you
have a spouse or family. Those limits jump by a $1,000 “catch-up” limit for
each person in the household over age 55. Your employer can contribute, but the
ceiling is cumulative between your contributions and theirs. For example, say
you are lucky enough to have your employer put a hypothetical $1,000 into your
account in 2019; you may only contribute as much as the rest of your limit,
minus that $1,000. If you go over that limit, you will incur a 6% tax penalty,
so it is smart to watch how much you contribute.3
Alternately, you could do without an HSA and simply earmark a
portion of your retirement savings for possible extended care costs.
One thing is for certain: any retiree or retirement saver needs to
keep the possibility of extended care expenses in mind. Today is not too soon
to explore the financial options to try and meet this challenge.
Taylor McClish may be reached at (503) 239-3060 or Taylor.McClish@cunamutual.com
This material was prepared by MarketingPro, Inc., and does not
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Citations.
1 -
marketwatch.com/story/long-term-care-insurance-has-a-shaky-future-here-are-new-ways-to-tackle-the-high-cost-of-aging-2019-05-22
[8/4/19]
2 - health.usnews.com/health-care/patient-advice/articles/dementia-care-in-assisted-living-homes
[8/21/19]
3 -
investors.com/etfs-and-funds/personal-finance/hsa-contribution-limits-hsa-rules/
[3/13/19]