Over the last few decades life expectancies have increased, giving many Americans a retirement that can last 30 years or more. Increasing longevity has resulted in longer, more fulfilling retirements, but has also led to more complications from unexpected health costs that can derail even the most well thought out plans.  Developing a plan to address this risk can be an important part of your overall financial strategy.

What is long-term care?

Long-term care can be as simple as assistance with a range of daily living tasks such as walking, eating and bathing. In other instances, long-term care may mean sustained treatment for cognitive conditions, like Alzheimer’s. While a short term need for help or a limited visit to a rehabilitation facility will generally be covered by Medicare or traditional health insurance policies, a long-term care event is usually not covered and can have significant impact on your family. Therefore it’s important to think about the many questions that will have to be answered before you face a long-term care need: Who will be your primary caregiver? Where do you want to receive care? And how will your health and care needs impact your family and your finances?

Making a plan

Just like any other risk, it’s important to think about your options for covering long-term care expenses and develop a plan. There are two approaches to consider. First, you can self-insure by managing the risk inside your portfolio. To be successful in this approach, you should establish a clear goal for how much you will need to set aside to cover long-term care expenses and invest that money more conservatively in order to ensure it is available when you need it. Your investments will be subject to market risk and you run the risk of expenses outpacing the amount you set aside.

The second approach is to transfer the risk to an insurance company through the purchase of a long-term care insurance product. Long-term care insurance can help you protect your wealth while also reducing the potential burden you place on your family. When structured properly, long-term care insurance can help ensure that you’ll have access to high-quality care should you ever need it, without having to spend your life’s savings to pay for it.

Understand your long-term care insurance⁵ options

When considering long-term care insurance, it is important to understand the breadth of options you have available to fit your individual needs and preferences. The following types of long-term care coverage are available through Merrill:

Hybrid life insurance with a long-term care benefits rider

• A life insurance policy that provides long-term care benefits if you need them
• Long-term care benefits can be less generous than traditional long-term care insurance⁶
• Unused benefits are paid out to beneficiaries as a death benefit
• Premiums may be paid over time or all at once in a single premium payment when the policy is purchased. In designs where premiums are guaranteed, they will not increase.
• Streamlined underwriting process may be available

Permanent life insurance with a long-term care benefits rider

• A life insurance policy with a death benefit which also has a rider that provides access to a percentage of the death benefit to cover long-term care expenses
• Beneficiaries receive any remaining unused death benefit
• Premiums may be paid over time or all at once in a single premium payment when the policy is purchased. In designs where premiums are guaranteed, they will not increase.
• Underwriting required

Part of your larger financial strategy

You’ve worked hard to build your wealth for a more secure future. As you approach retirement, protecting that wealth becomes even more important than building it. A financial strategy that addresses healthcare costs — both those you expect and those that are less predictable, such as the need for long-term care — may help protect your assets, reduce the burden on your family should you need care and enable you to leave a more meaningful legacy for your heirs.