Planning Ahead for Long-Term Care Could Save You When You Need It

Entering the third act of your life comes with a new set of needs. Medical issues, retirement considerations, financial flow, and living arrangements evolve as you get older. Medicare can cover the cost of health care needs for seniors, but when it comes to assisted living and nursing care, you might be on your own. Whether you’re a retired senior, a younger person looking toward your future, or a family member looking out for a loved one’s long-term care, consider planning ahead for how you’ll pay for it.

The following three tips apply to seniors who are already shopping for long-term care.

Life settlements

A life settlement, or a senior settlement, is when you sell your life insurance policy to a third-party company for a cash payout. You’ll receive less money than your life insurance payout, but the amount will be more than what you would receive if you canceled your policy. Like all financial settlements, the amount agreed on is an in-between. This means that your beneficiaries might not receive anything, but you’ll be able to pay for your long-term care in a nursing home or assisted living home.


Make sure you know the drawbacks of selling your life insurance policy like taxation, the sharing of your health information and the inability to purchase another life insurance policy. Another option is an accelerated benefit, which is adding a rider that allows terminally ill patients to access their life insurance benefits for long-term care.

Cash out your retirement accounts to fund your long-term care.

Retirement accounts can include 401(k)s (employer-sponsored retirement plan), deferred annuities (insurance company payments and disbursements), and IRAs (Individual Retirement Account). Anytime you cash out an investment early, you could be subject to penalty fees and/or taxes. Some withdrawals are tax-free, so make sure you understand your options and the cost of the withdrawal before making a decision.


If you’ve depleted your financial resources and have less than $2,000 in liquid assets, you may qualify to have Medicaid cover your long-term care. With Medicaid, only nursing homes are covered, and you’re limited on choices. If you prefer assisted living, this might not be the right option for you.

These next two tips apply to younger people who are planning ahead.

Buy long-term care insurance when you’re younger.

The earlier you start, the lower your premium. The older you are when you purchase long-term care insurance, the more the insurance provider will charge you because they need to collect enough to cover what they’ll spend on you later on. You also have the option of putting your money into a combined annuity with long-term care benefits.

Save up!

You can also forego the high premiums in long-term care insurance by saving the money yourself. This way, you’re guaranteed to have the money for what you need in case you never use your long-term care insurance. However, you could end up paying more for assisted living or a nursing home if you’re paying out of pocket. It’s difficult to predict what your circumstances, length of stay and medical needs will be.

Financial institutions offer Health Savings Accounts (HSA) to customers with high-deductible health care plans. Individuals with HSAs are able to contribute money to an account that grows and can be used for medical expenses, including long-term care.

Assisted Living can cost $30,000-$80,000, depending on where you live. A nursing home could cost even more. Many people fail to factor in the cost of long-term care when planning for their retirement, if they even bother to plan for retirement at all. Not accounting for long-term care is risky because most seniors will need it at some point, and the cost is high. Don’t fall for the misconception that Medicare will cover your long-term care. It will come to the rescue when you have short-term rehabilitation needs, but the rest falls squarely on your own shoulders.