hands held together in long term care

Will Long-Term Care Be The Burden That Breaks Your Finances?

6 Options That Could Help You Cover The Expense

By Chris Orestis

When people plot their retirement years, the focus is often on more time for travel, more time for hobbies and more time with the grandchildren.

Too often, though, they don’t factor in something that may not be inevitable, but definitely is probable. There’s a good chance they eventually will need long-term care and that can get real expensive real fast.

The average monthly cost of an assisted living facility is $4,300, according to the Genworth annual Cost of Care Survey. The average monthly cost of a private room in a nursing home is twice that – $8,821. 

If you think the odds are against you ever needing to worry about this expense, think again. According to the U.S. Department of Health and Human Services, someone turning 65 today has almost a 70% chance of needing long-term care sometime during their remaining years.

That means it’s imperative for seniors and their families to prepare for how they will pay for this potential crisis that’s hovering just over the horizon. It’s important to note that Medicare doesn’t pay for long-term care. Medicaid does, but it is need-based, meaning many people have too much money to qualify for it.

But there are other options available, especially for those who start planning early. Those include:

  • Long-Term Care Insurance. These insurance policies provide a fixed monthly payment to cover approved forms of qualifying long-term care.  Long-term care insurance can be purchased as a stand-alone policy or as a life/LTC hybrid policy. The younger and healthier a person is when buying a policy, the more affordable their premium rates are and the greater the likelihood they will qualify for a policy. Wait too long, though, and your application for the insurance could be denied. The American Association for Long-Term Care Insurance reported in 2019 that coverage was rejected for 51% of applicants who were 75 or older.  
  • LTC Life Settlements. A life settlement is where a life insurance policyholder sells their policy to a third-party in exchange for a cash settlement that is put into a long-term-care benefit plan. That plan is similar to a Health Savings Plan. This LTC benefit Plan is an irrevocable bank account that is professionally administered with payments made monthly to long-term care providers.  Medically qualified policy owners who use an LTC-life settlement are able to immediately direct tax-exempt payments to cover their senior housing and long-term care costs. 
  • Veterans Aid & Attendance Benefit. Veterans who served during wartime, as well as their spouses, may be eligible to receive monthly benefits paid directly towards qualifying long-term care service.  As with Medicaid, the applicant must meet both medical necessity and income/asset level requirements to qualify.
  • Reverse Mortgage. Homeowners who are 62 or older, and have little to no remaining balance on their mortgage, can qualify for a HUD-backed Home Equity Conversion Mortgage (HECM) loan. This loan, based on the equity in the home, can come in the form of a lump sum, monthly income, or a line of credit.  For the homeowner to qualify, the home must still be the primary residence and the loan must be paid back with interest and fees after the homeowner dies. That repayment typically happens through the sale of the property.
  • Senior Living Loans.These are loans that can be secured specifically to pay for long-term care services. These loans are unsecured by collateral. Instead, they are guaranteed by one or more family members who co-sign. Interest rates are similar to a credit card and the loans are typically between $50,000 to $500,000 for a term of one year or less.  
  • Medicaid Compliant Annuity. One way people qualify for Medicaid to pay for their long-term care is to spend down their assets. But that’s a problem for married couples if one spouse needs long-term care while the other still needs that money to live on. That’s where a Medicaid compliant annuity comes in. A single-premium immediate annuity can be purchased to set up a guaranteed-income stream for one spouse while the other spouse qualifies to go onto Medicaid and into a nursing home. This is an irrevocable annuity established for a period of time that is equal to or less than the remaining life expectancy of the annuitant. The state is named as the remainder beneficiary to receive any funds after the annuitant dies.

Long-term care is a real concern that every family needs to plan for. While some of the funding options can help people address a sudden and immediate need for care, it’s better to plan and get informed far in advance of the need.

That way, with worries about the financial aspect of long-term care already addressed, you can get back to thinking about travel, hobbies and grandchildren.


About Chris Orestis

Chris Orestis, CSA, is president of Retirement Genius (www.retirementgenius.com), and is a nationally recognized financial, health/LTC, and retirement issues expert. He has over 25 years’ experience in the insurance and long-term care industries and is credited with pioneering the Long-Term Care Life Settlement over a decade ago. Known as a political insider and senior issues advocate, Orestis is a former Washington, D.C. lobbyist who has worked in both the White House and for the Senate Majority Leader on Capitol Hill. In 2007 he founded Life Care Funding, and in 2017 he founded the LifeCare Xchange. Chris Orestis is author of the books Help on the Way and A Survival Guide to Aging– with a third book Retire Like a Genius to be published in 2021. He has been speaking for two-decades across the country about senior finance and the secrets to aging with financial and physical health and dignity. In 2019, Chris was named one of the twenty most innovative people in the life insurance industry by the National Association of Independent Life Brokerage Agencies (NAILBA). He has appeared in The New York Times, The Wall Street Journal, CNBC, NBC News, Fox News, USA Today, Kiplinger’s, Investor’s Business Daily, AARP, PBS, and numerous other media outlets, is a frequent columnist for NewsMax Finance, Broker World, ThinkAdvisor, IRIS, and has been a guest expert on over 50 radio programs and TV appearances.