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Long-term care insurance It is an important way to reduce risk during retirement. Unexpected health problems and related expenses can dominate a retiree’s financial life without a plan to pay for care expenses. The cost of such a policy will depend on a few factors – including your age and level of coverage – so whether you should accept a $2,000 annual premium is entirely dependent on your personal profile.
If you buy early, this price may be slightly higher. In your 50s, a policy can cost anywhere from $1,000 to $2,000 a year, depending on the coverage you need. American Long Term Care Insurance Association.
This rate is much lower if you wait until retirement. A long-term care insurance policy in your 60s and 70s can cost anywhere from $2,000 to $4,500 a year, depending on your different coverage options.
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Long-term care insurance is a policy that pays for ongoing support services.
Long-term care often involves in-home help, such as a visiting nurse, or stays in a medical facility, such as an assisted living or nursing home. Most people need insurance, Medicaid, or another financial source to pay for it. Depending on the nature of your services, Long-term care can be expensive $5,000 to $8,000 per month plus expenses.
This all goes back to our headline question, is $2,000 a year long-term care insurance affordable?
The answer depends. Going back to data from America’s long-term care insurers, here are some average policy rates for agent profiles:
Age 55, single male, $165,000 coverage, no inflation – $900/year
Age 55, single woman, $165,000 coverage, no inflation – $1,500/year
Age 55, single male, $165,000 coverage, 2% inflation – $1,650/year
Age 55, single female, $165,000 coverage, 2% inflation – $2,725
So say you’re a woman in your 50s looking for an inflation-adjusting policy. With that profile, $2,000 a month is a good deal. On the other hand, $2,000 a year is somewhat excessive for someone in the same position.
Then there are the prices if you wait until retirement age:
Age 65, single male, $165,000 coverage, no inflation – $1,700/year
Age 65, single woman, $165,000 coverage, no inflation – $2,700 per year
Age 65, single male, $165,000 coverage, 2% inflation – $2,600/year
Age 65, single woman, $165,000 coverage, 2% inflation – $4,230/year
Here, your $2,000 offer is definitely a good deal unless you want to factor their benefits into inflation, which is probably a bad decision.
Long-term care insurance is an integral part of retirement planning. It is expensive, but the care it covers can be important. While budgeting for this insurance can be difficult in retirement, budgeting for the nursing home itself can be even more difficult.
The cost of long-term care is the basis of all health insurance logic. The more services you need, and the sooner you need them, the higher your premium will be. Some of the most important ones include:
Your age when you buy the policy
Your life expectancy
Cover size
Cover inflation adjustment
Your state and health care costs
The earlier you buy care, the cheaper your premiums will be, because you’ll be holding the insurance longer before using it. The longer your life expectancy, the higher your premium will be because you will generally be able to use more care. Because of this, long-term care is generally more expensive for women than for men because women live longer.
It covers your long-term care expenses up to a limit, and the higher this coverage limit, the more expensive your policy will be. The average policy provides $165,000 in coverage. For an additional premium, that coverage may be indexed to inflation. This increases the cover by a certain amount every year so the policy retains its spending power.
Inflation adjustment, in general, is important.
Ultimately, your state and territory will determine the costs of your overall care. For example, according to New York Life Insurance, Average price $8,071 to stay in a New York City assisted living facility. A similar stay in rural North Dakota costs $3,179. This will determine the amount of coverage you need, as well as the policy requirements and prices.
A Financial advisor It can help you determine the appropriate premium.
Long-term care insurance is expensive, and for many people $2,000 is a great price. Let’s break down how these policies work and what you’ll pay.
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Keep an emergency fund handy in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t exposed to high volatility, like the stock market. The trade-off is because the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.
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