Asset planning with a view to long term care costs.
Many have worked and saved for forty years to build a nest egg meant to support them in retirement — but too many have not saved enough, or cannot cover every type of health care cost that arrives with it.
We pay for care with two things.
Everything else is a variation on income or liquidation. Knowing which one you will lean on decides how early planning has to begin.
Income
Social Security and pension or investment income covers monthly living expenses and a few larger items each year — property taxes, insurance, appliances, a car. The old 4–5% withdrawal rule deserves a second look when markets are stretched.
Liquidating assets
Selling investments, cashing in insurance or borrowing against home equity are frequent — and difficult — choices once care has already started.
Six areas you need to understand before care begins.
Rules vary by state; federal guidelines are the minimum. These ideas may or may not apply to your situation — always review them with a professional.
Assets and income are viewed differently
Medicaid planning legally shelters assets. How much depends on family help and availability, cost and length of care, and how far ahead you started.
Countable assets
Must be used or sold to offset the cost of care: second cars, RVs, boats, second homes, rental property, business, gas and oil interests, stocks, bonds, IRAs, 401(k)s and whole life cash value.
Non-countable assets
Pre-paid funeral costs, certain trusts, gifting strategies and funds for special-needs children. These must be arranged well in advance of the need for care.
Annuity income
A lump sum converted into a defined income stream can help, though state-mandated beneficiary rules limit how popular this option has become.
Look-back periods
Usually 60 months from the time of application. When the window starts and stops can be planned for — hospital stays and skilled nursing stays can create advantageous timing.
Entitlement benefits
Veterans who served during eligible wartime may access Aid & Attendance — up to $2,750 per month for a veteran and $1,479 for a surviving spouse. A 50-year-old benefit that remains widely unused.
The Conclusion
In the end, a combination of advanced planning, current income, entitlement benefits, some assets and family variables together secure a household against catastrophic care costs. No one will advertise your options — it is up to you to understand them and act before a crisis decides for you.
Reference Links
- EPI Study — State of American Retirement
- Social Security Administration — Trustees Report Summary
- Medicare.gov — Durable Medical Equipment Coverage
- Social Security History — Why Medicare Matters (PDF)
- 360 Financial Literacy — Medicaid Planning Basics
- Ohio Administrative Code — Medicaid Resource Rules (5160:1-3-05.3)
- U.S. Dept of Veterans Affairs — Aid & Attendance Benefits
- Genworth Cost of Care Study — Long-Term Care Survey (PDF)
Ask for LTC Planning Report #14.
Free, along with a 50-minute review of your situation — by phone or email.