Samantha Stein is an online content manager for ALTCP.org. Her works focus on long-term care information that covers long term care insurance, financial planning, elder care and retirement. In line with the organization’s goal, Samantha creates content that helps raise awareness on the importance of having a comprehensive long-term care plan not just for the good of the individual but for the safety of the entire family.
Self-insurance is a method where individuals utilize their risk management skills to build funds that will cover their needs during retirement. On the other hand, long term care insurance is an insurance product that provides the resources a person would need to receive care after he or she pays a certain amount of premiums.
For baby boomers planning for retirement and long term care, which of the two is the ideal option to take?
Retirement and Long Term Care
Over the years, we have witnessed a striking change in retirement: people are no longer retiring at the age of 65. Perhaps, one of the biggest reasons for this delay is the lack of confidence in their own financial capabilities.
As we all know, the expenses that come with retirement are colossal, to say the least. In fact, one look at the average cost of long term care can tell you why so many lack the confidence in saying they have saved enough money to retire. People are terrified of the possibility of outliving their savings, so they choose to continue working. However, despite these efforts, retirement and long term care still require thorough planning.
Finding comprehensive coverage for long term care is not as easy as it seems. While some believe that self-funding is the best option, many choose to put their trust in the hands of long term care insurance companies. Let’s examine both methods to see which option suits the changing needs of baby boomers.
Self-insurance refers to using your own assets and finances to cover any form of care you might need. Another method is by setting aside money frequently in savings accounts until you need any form of care.
Perhaps, one of the biggest advantages of being self-insured is the lack of hefty premiums. This means you have more liberty with the pool of money you have saved over the years.
However, bear in mind that this option has risks, too. Experts have advised that this strategy works best for individuals with assets amounting to $2.5 million or more. Moreover, self-insurance is more fitting for those who live in areas with relatively lower costs for care services.
Long Term Care Insurance
Many individuals automatically assume that long term care insurance policies are only useful to those who need nursing home care. However, this type of coverage offers more than people realize. So this leaves a new question on people’s minds about long term care insurance: what does it cover?
These policies provide coverage (based on policy limits) for the assistance in completing the activities daily living. What makes it different from other health-related coverage is that it targets care-oriented services as opposed to cure-related activities. Moreover, it is important to note that some policies offer cash benefits that allow policyholders to use the benefits they may choose. Some opt to pay their family caregivers for the service they provide.
However, long term care insurance can cost a great of deal money if not managed properly. Many find their premiums too expensive because they applied for coverage at a later age. Others face high costs because of overloaded policies. The cost of a long term care policy is based on the maximum amount a policy will pay per day and the maximum number of days (years) that a policy will pay.
Finding the Right Coverage for Yourself
At the end of the day, different people end up with varying needs and circumstances. What may work for your peers may be detrimental to your situation, so be sure to weigh your options effectively. Also, make sure to consult with the specialist, and let them guide you in finding the best type of coverage for your needs and circumstances.