Of course we don’t want to think about needing long-term healthcare. We like to imagine that somehow we will fall outside of the fate of 70% of people who will need some form of long-term care during their lives (U.S. Department of Health and Human Services). But allotting some time to educate yourself on the possibility of your future health needs and finding the best plan for financial solutions can help with the impact of the potential costs associated and put your mind at ease. Here is some insight that might help.
First, there are some common misconceptions about long-term healthcare:
- Misconception #1 – I don’t need to worry about paying for long-term care. Medicare will cover all my medical expenses.
- Reality – While Medicare will cover certain costs of care in a hospital or a skilled nursing facility (and very limited home care and hospice care costs), that coverage comes with a set of conditions. In other words, you must qualify meeting a stringent set of rules.
- Misconception #2 – I’ll never need long-term care. My family will take care of me if I get sick.
- Reality – Often this type of assumption is made without checking with family members first. Also, most underestimate the impact of providing extended care, which can be significant. It could be a lot to ask of a family member.
- Misconception #3 – I’ll never end up in a nursing home.
- Reality – A majority of people will need some form of long-term care during their lives.
- Misconception #4 – Long-term care insurance is my only option.
- Reality – While it’s one solution to the potential problem, there is another: Health Savings Accounts (HSA). This is a tax-advantaged way to save. Contributions are tax-deductible– or if made through a payroll deduction– they are pre-tax, and the interest earned is tax-free. Additionally, consider it a “shadow” 401k in that it is portable into retirement. It can be the savings bucket in your retirement plan for health needs. You can save and invest in your HSA account, and when you pull the money out for eligible medical expenses and some health insurance premiums in retirement, there’s no tax then either.
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Sources: Journal of Accountancy, March 2017, U.S. Dept. of Health and Human Services, CNN Money, Feb. 16, 2017 , CNN Money, March 10, 2017, Ascensus