Budgeting For Long-Term Care

By Max Gottlieb, 

Money, money, money…where do we begin? For the elderly specifically, finances can be a major source of stress. No longer working, money may be coming in from a pension, disability, or social security and although it may not seem like a lot, there are ways to make a fixed income work. Since it’s already hard enough to make ends meet, many disregard planning for long-term care altogether, but regardless of your financial situation, it’s never impossible to plan ahead.

It goes without saying that some things cannot be taken out of a budget; like groceries, a mortgage, rent, car payments, etc. The key though, is to find out how much is being spent on these essentials each month. For seniors who are comfortable with computers, there are many tools available that can help keep track of a budget. Software solutions can range from something as simple as Microsoft Excel (if you don’t mind manual entry) to an automatic website called Mint. Mint is a free personal accounting tool that links directly to a user’s bank account and tracks spending by category. For those who don’t like using the computer, a pen and paper is perfectly acceptable. The main goal, regardless of method, is to get a well-defined idea of where money is being spent each month. Although it sounds simple enough, you’d be surprised at how many people spend superfluously without being aware.

After getting a handle on your budget, the next step is to consider what kind of support system you would have if you ever had a need for long-term care. Even if long term care seems like it’s a long way off, it’s never too early to start planning. Start saving now and begin to consider your future support system. Do your children live close by and if so, are they able to become caregivers in the event of a health decline? When planning ahead, always assume you will need the maximum amount of care since planning for the worst is the best way to be prepared. Figuring out how much your children, other relatives, and friends can help will allow you to understand what your needs will be in the future.

On the other end of the spectrum, if saving for long-term care seems unrealistic or you do not have children, there is Medicaid funded long-term care. With Medicaid long-term care, maintaining very little savings and income is in your best interest. Most states have a maximum monthly income level hovering around $2,000. See this guide for your state’s exact requirements. In regards to assets, each state has exempt and available assets when it comes to paying for care. With a 5-year look back period, assets cannot simply be given away as gifts or the applicant will be disqualified. You never know when circumstances may change, but many people get to that point with little plan in mind.

If neither of the above options match your situation then long-term care (LTC) insurance may be of interest. According to a 2015 study published by Yale, “few Americans buy long-term care insurance, and over 40% of long-term care expenses are paid out of pocket.” This may be happening for a couple of reasons. For starters, policies must be applied for while the future policyholder is healthy. This could mean the policy is bought years prior to any actual long-term care necessity. Without a need in the near future, many people are understandably slow to act. LTC insurance is useful, however, because it will pay for professional care rather than having those costs come out of pocket.

Perhaps the greatest benefit of an LTC policy, which many people are unaware of, is that most states have partnership plans. A partnership plan means that policyholders can receive Medicaid benefits towards care while protecting assets. For example, if you bought a partnership policy with a maximum benefit payout of $100,000 then you are able to protect $100,000 worth of assets once the insurance policy is exhausted. This is really the only way to protect assets and receive Medicaid benefits.

The important thing is to plan ahead and know your budget before a crisis strikes. Rather than waiting, be proactive and talk to your family about what you, along with them, think is the best option. Some people never need long-term care, but again, to be on the safe side, it’s always best to plan for the worst.

Max Gottlieb works with Senior Planning. Senior Planning provides free assistance to seniors or the disabled, specializing in long-term care. Senior Planning helps seniors find in-home care, eldercare facilities, and state and federal benefits.

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