FEATURE — As the world slowly begins moving forward from the COVID-19 pandemic, we’re only now beginning to understand some of the impacts the virus has had on health care and retirement planning.

If Americans have gained anything positive from the pandemic, it’s that they are now re-thinking how they plan their financial futures. For example, 39% of deaths attributed to COVID-19 have occurred among nursing home patients. These deaths have caused many of us to include long-term care planning as part of our retirement blueprint. Over 70% of us will need some form of long-term care during our retirements. 

While much of this care comes from loved ones, 48% of people turning 65 will also need some form of paid long-term-care during their lifetimes. 

In 2020, the median annual cost for assisted living facilities in the United States was over $51,000. Experts expect the median yearly nursing home cost for a private room in 2050 to be nearly $257,000!

It’s reasonable to assume that most people are not prepared to absorb such costs once they retire. The lack of a long-term care plan impacts many pre-retirees, especially people who have lost wages and benefits due to the pandemic.

You might not need insurance, but you need a plan.

Premiums for long-term care policies average $2,700 a year, according to the industry research firm LifePlans. That puts the coverage out of reach for many Americans. If your assets are few, you may eventually be able to cover long-term care costs through the national program Medicaid; it is only available if you’re impoverished. If you have assets, you may likely be able to pay for future care out of pocket.

But you should also weigh factors other than cash: Do you have home equity you could tap? Or nearby children who can be counted on to pitch in? Do you have a family history of dementia that puts you at higher risk of needing care?

If you’re pulling less than 4% out of your savings each year for living expenses, you may be comfortable going without insurance, Benz says. In that case, though, you’ll need to plan for that possible expense. That means saving more than you may have planned and segregating your long-term care kitty from the portfolio you tap for everyday income.

How has COVID changed long-term-care? 

Possible decreases in the number of available facilities

COVID-19 contributed directly or indirectly to the deaths of over 300,000 nursing home residents. 

This fact has increased the number of individuals who say they’d prefer care in their home versus care in a skilled nursing facility. Such changes in attitudes about in-home care put pressure on an already beleaguered nursing home industry, forcing some facilities to close or cut back on staff.

Increased costs for the government

As the largest payer of long-term care costs, Medicaid provides nearly half of all money spent on long-term care services. About 6 in 10 nursing home residents currently receive Medicaid coverage. This number is likely to increase and with it, more stress on the national budget.

Changes to long-term care insurance

The COVID-19 pandemic is pushing older Americans in the direction of getting long-term care in their own homes instead of in nursing homes. Because of this, fewer and fewer new long-term care policies cover facility-only care. Those who want or need skilled nursing facility care may find it challenging to purchase the type of long-term care insurance required. 

The very low-interest rates available for insurance companies to invest their reserves have created a situation where enforce policies are faced with a premium increase. Since long-term care premiums are not guaranteed, insurance companies have the authority to increase premiums by passing along the difficulties of low interest in the form of increased premiums. The policy owner helps cover risk management for the insurance company by increasing their cash flow.

We don’t yet know the full impact of COVID-19 on long-term care insurance; however, some carriers have already implemented rate increases and changed plan benefits. Rates will likely continue to increase, and underwriting criteria will become stringent. People who don’t obtain long-term care policies when they are younger and in good health might discover it’s nearly impossible to get a policy later in life.

Could an annuity with long-term care benefits be a solution?

Numerous companies now offer annuities that provide some long-term care benefits, with much more straightforward, less stringent underwriting. Besides the more relaxed underwriting requirements, there are some other benefits of purchasing a simplified issue annuity with long-term care benefits.

You will have a fixed premium long-term care policy

Traditional long-term care policy premiums can and do increase. With a long-term care annuity, there is no increase in premium. Traditional long-term care is a “use it or lose it” proposition. As is the case with homeowner’s or auto insurance, you may never need long-term care insurance, but you won’t get your premiums back if you don’t use it.  

Summing it up

 Even if you cannot qualify for traditional long-term care coverage or cannot afford it, you can still get some protection. Long-term care annuities can help you offset some of nursing home care costs while offering growth opportunities, protection of principal and tax advantages.

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