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Long-term care insurance is an important way to mitigate retirement risks. Unexpected health problems and related expenses may take over the retiree's financial life if they do not plan to pay for care. The cost of such policies will depend on a few factors (including your age and coverage level), so whether you should accept an annual premium of $2,000 is entirely up to your profile.
If you buy it early, this price may be a bit high. In your 50s, according to the American Long-term Care Insurance Association, a policy costs between $1,000 and $2,000 per year.
If you wait until retirement, this price is very low. In the 60s and 70s, long-term care insurance policies cost between $2,000 and $4,500 per year, depending on your various coverages.
Plan all your retirement needs early and can have a significant impact on your finances. Talk to the financial advisor today to develop a personal plan.
Long-term care insurance is a policy that pays for ongoing support services.
In most cases, long-term care will pay for your family assistance (such as visiting nurses), or stay in a medical facility, such as assisted living or nursing homes. Most people need insurance, Medicaid, or some other source of funding to pay for it. Depending on the nature of your service, long-term care costs between $5,000 and $8,000 per month, plus additional costs.
All of this goes back to our title question, is $2,000 per year a reasonable price for long-term care insurance?
The answer is, it depends. Returning to data from the American Long-term Care Insurance Association, several average policy prices representing the data include:
55 years old, single male, $165,000 coverage, no inflation - $900 per year
55, single woman, $165,000 coverage, no inflation - $1,500 per year
55 years old, single male, $165,000 coverage, 2% inflation - $1,650 per year
55, single woman, $165,000 coverage, 2% inflation - $2,725
So, let's say you're a woman in her 50s who want a policy to adjust benchmark inflation. With that profile, $2,000 per month is a good deal. On the other hand, for a similar person, the price of $2,000 per year is too high.
Then, if you wait until retirement age, there is a price:
Age 65, single male, $165,000 covered, no inflation - $1,700 per year
65, single woman, $165,000 coverage, no inflation - $2,700 per year
65 years old, single male, $165,000 coverage, 2% inflation - $2,600/year
65, single woman, $165,000 coverage, 2% inflation - $4,230 per year
Here, your $2,000 offer is almost certainly a good choice unless you are someone who doesn't want to index for inflation, which can be a bad decision.
Long-term care insurance is a key part of your retirement plan. It's expensive, but the care it covers may be essential. While it may be difficult to budget for this insurance when you retire, it is even more difficult to budget for the nursing home itself.
Talk to your financial advisor today about your long-term care insurance needs.
Pricing for long-term care is based on the same basic logic as all health insurances. The more services you need, the sooner you need them, the higher your premium will be. Some of the most important factors include:
Age at the time of purchase policy
Your life expectancy
Coverage
Inflation adjustment for coverage
Your state and its healthcare costs
The sooner you buy care, your premium will be cheaper, because you will have longer insurance before using it. The longer life expectancy, the higher the premiums are, as you may use more care. Therefore, long-term care is often more expensive for women than for men because women have longer life expectancy.
Long-term care covers you up to limits, and the higher this coverage limit, the more expensive your policy is. The average policy provides coverage of $165,000. For additional premiums, you can cover it as inflation. This will increase coverage at a set rate each year, so the policy retains its spending capacity.
Inflation adjustments are often essential.
Finally, your state and district will determine your overall care costs. For example, living in assisted living facilities in New York City costs an average of $8,071, according to New York Life Insurance. The same accommodation costs $3,179 in rural North Dakota. This will determine the coverage you need as well as policy requirements and prices.
A financial advisor can help you determine the appropriate premium.
Long-term care insurance is expensive, and for many people, $2,000 is a very good price. Let’s break down how these policies work and what you should pay.
Don't forget to make sure your healthcare is covered as well. Depending on the time you retire, you may need to introduce yourself for a while, so you will also need to budget for these expenses.
Financial advisors can help you develop a comprehensive retirement plan. Finding a financial advisor is not necessarily difficult. SmartAsset's free tools match you with a reviewed financial advisor who you can serve up to your area, and you can play with your advisor for free to decide which one you think is right for you. If you are ready to find an advisor who can help you achieve your financial goals, get started now.
If you experience unexpected expenses, keep the emergency fund. Emergency funds should be liquid - in accounts that do not have significant fluctuations like stock markets. The trade-off is that inflation can erode the value of liquid cash. However, high interest accounts allow you to earn complex interest. Compare savings accounts for these banks.
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