With the retirement of more Baby Boomers, the U.S. is facing a looming Long-Term Care (LTC) crisis. The U.S. Department of Health and Human Services reports that 70% of individuals turning 65 today will require some form of long-term care in their later years. Additionally, a Harvard study reveals that over 40% of people aged 65 and older live alone, and this figure rises to nearly 60% by age 80. Given the rising costs of long-term care insurance, annuities with LTC riders offer a potential solution for those needing in-home care, particularly those living alone.
The Escalating Cost of Long-Term Care
Healthcare inflation, partly driven by the departure of skilled workers post-COVID-19, has significantly increased the cost of long-term and in-home care. According to CBS.com, the cost for a semi-private room in a nursing home can soar to $100,000 annually, varying by location. It’s important to note that custodial care, being non-medical, is not covered by FEHB or Medicare.
The Impact of Healthcare Inflation on LTC Insurance
While LTC insurance offers peace of mind, healthcare inflation has made it increasingly unaffordable for many retirees. The premiums for the federal FLTCIP plan, for instance, have surged, forcing participants to choose between higher premiums or reduced coverage. Delaying the purchase of an LTC policy from a private insurer can result in even higher premiums or denial of coverage. Additionally, LTC insurance lacks the growth potential of annuities, and the premiums paid may be lost if LTC services are never needed.
Benefits of Annuities with Long-Term Care Riders
Opting for an annuity with an LTC rider eliminates concerns about chronic health conditions, as no medical underwriting is required (although some conditions like Parkinson’s may be excluded). This rider grants immediate access to long-term care funds, which can be used tax-free for LTC services, including nursing home care.
Moreover, annuities serve as a retirement asset that grows and guarantees a lifetime income stream, alongside providing a death benefit for beneficiaries. If long-term care is not needed, the accumulated value of the annuity can be inherited by your heirs.
By considering these aspects, annuities with LTC riders can offer a versatile and financially sound option for managing potential long-term care needs.Meet with an FRC® trained advisor to learn more about how lifetime annuities work.
