People all get weaker and weaker as they age or a medical condition worsens. At some point, they may not be able to take a shower on their own as it would risk falling and getting injured. Even walking and cooking may be difficult to do. This would be a good time to get some help. Hiring someone to care for them at home or getting the care in an assisted living or nursing home facility would cost a lot of money, currently around $60,000 to $120,000 a year depending on where they live and the type of service they need. This type of service is called long-term care. Statistics show that needing long-term care in retirement is a high probability and high cost event.

Long-term care involves a variety of services designed to meet a person’s healthcare or personal care needs during a long period of time (generally from 100 days to many years). These services help people live as independently and safely as possible when they can no longer perform everyday activities on their own. According to the US Department of Health and Human Services, someone turning 65 today has almost a 70% chance of needing some type of long-term care in their remaining years, and the average use of long-term care services is 3 years.

Personal care is the type of long-term care that is most commonly needed by seniors. It typically means those everyday activities of daily living (ADLs) that all of us do — things like getting bathed and dressed, using the toilet, personal grooming, and eating, as well as sitting, standing, and moving about.

Assistance with other activities of daily living, which include things like cooking, cleaning, transportation, laundry, and managing finances, also fall under the category of long-term care, as do health and medical services, such as those provided by a home health worker, in a skilled nursing facility (also called a nursing home), or in a rehabilitation center.

It is common for people to require long-term care when they have an ongoing or degenerative health condition, or have a disability, but the need for long-term care also can arise quite suddenly. For instance, when someone suffers a heart attack or stroke, has an accident, or even when they undergo surgery, it can result in the need for long-term care services. The need can be temporary (such as during the surgery recovery process) or permanent (such as in the later stages of dementia).

Most often, however, the need for long-term care services develops gradually, as people get older and frailer, decline physically or mentally, or as an illness or disability worsens. Note that the need for long-term care may also be a result of mental health problems (such as Alzheimer’s, dementia, memory loss, Parkinson’s, etc)

Continue reading, and you will find out more information on:

• What are the odds of a person needing long-term care in retirement years?
• How long do people need long-term care?
• How costly are long-term care services?
• What is a good way to handle the long-term care problem?
• Can you have a quality life in retirement if the long-term care problem is not addressed early?

The long-term care (LTC) problem impacts the quality of life for most retirees and is one of the biggest risk factors affecting our retirement lives. In the late stage of our retirement, most of us will see the balance of our savings/investment accounts shrinking or diminishing rapidly. On the top of it, if long-term care is needed with such high cost and high probability, would it make us worry and lose sleep? Even if we have the ability to pay the high cost by withdrawing money from retirement or taxable accounts, our tax rate may spike up one or two levels, which could make self-funding a sub-optimal option. Having a good plan early on this problem would give us not only peace of mind but also more financial security.

For this problem, time is important. When a person reaches a certain age or health condition deteriorates, insurance companies may reject him/her. Thus, you may either act early or be rejected later. If you have relatively good health and prepare for it early, there are investment-focused strategies to save taxes while mitigating the risk of long-term care expenses.

Data-driven decision making is the most scientific way to approach and resolve problems. Let us look at the following articles from reputable sources to evaluate the seriousness of the long-term care problem and try to find out the best solution.

An investment-focused LTC (long-term care) policy is an insurance policy which contains an investment account inside the policy that can provide competitive investment growth. This investment account provides tax-deferred growth and typically has dozens of mutual funds, ETFs, and structured index strategies to construct a diversified portfolio. Dollar-cost averaging may be applied to invest in domestic and international stock, bond, balanced, real estate, and health care funds, etc. Using proper withdrawals and loans from the investment account, the policy owner may get tax-free income and pay 0% net loan interest. In addition, loans are not required to be paid back. If you are lucky not needing LTC in the end, or still have cash value in your investment account after your LTC coverage, your money in this investment account may be used for tax-free retirement income. With this solution, the LTC coverage and the living benefits (retirement income) may be exempt from federal and state taxes.

To see which strategy would benefit you the most, we provide free data analysis to help you decide. In addition, we may suggest a diversified portfolio with appropriate asset allocation based on your risk tolerance and investment profile. We may also help you with dollar-cost averaging and portfolio rebalancing.

If your age or health condition disqualifies you from investment-focused LTC policies, there are other but less ideal ways to mitigate the LTC risk. We will be happy to provide further analysis to help you minimize the LTC risk, so that you may have improved quality of life in retirement.

“A long-term care event would devastate your financial plan,”
"Elder care isn’t cheap. The annual national median cost for a private room in a nursing home was $102,200 in 2019, according to Genworth Financial."

"The U.S. Department of Health and Human Services (DHHS) says that approximately 70 percent of people over age 65 will require some degree of long-term care services during their lifetime."
"Yet, a separate statistic produced by AARP suggests that the lifetime probability of becoming disabled in at least two ADLs, or of being cognitively impaired, is 68 percent for people age 65 and older."

"According to a 2009 report jointly prepared by a group of advocacy and research organizations within the assisted living industry, the average length of stay for residents in an assisted living facility is about 28 months."
"A separate statistic provided by the National Investment Center (NIC) in their 2010 Investment Guide cited the average length of stay in assisted living as 29 months."
"According to the National Center for Assisted Living, 59% of all assisted living residents will eventually move to a skilled nursing facility. Across the board, the average stay in a nursing home is 835 days, according to the National Care Planning Council."

"And the longer you live, the more likely you’ll need long-term care. In fact, once a person reaches 80, there’s an 80% chance they will need long-term care in their lives, according to Loshak."
"Of note, long-term care, on average, is required for 3.9 years and for patients with Alzheimer’s, the average care need is six years or longer."
"One-third of today's 65 year-olds may never need long-term care support, but 20 percent will need it for longer than 5 years"