Are you already saving money for your retirement? Are you disciplined with your savings and careful with how you invest those savings? Is all of that part of a larger plan to ensure that you have amassed a sufficient retirement nest egg to live comfortably during your “Golden Years?” If so, then you undoubtedly would not want something to threaten your plan, or more specifically your retirement nest egg. There may, however, be a fairly serious and potentially damaging threat to your retirement nest egg – and you may not even be aware of it. The Lincolnshire asset protection lawyers at Hedeker Law Ltd. explain how nursing home costs can threaten your nest egg – and how you can combat that threat through careful planning.
Will You Need Long-Term Care?
No one wants to think about the likelihood that they will end up in a long-term care (LTC) facility; however, ignoring the possibility could be devastating to your retirement budget. While there is no way to know with certainty who will need LTC, statistics tell us that we all have a significant chance of ending up in an LTC facility. Consider the following facts and figures:
- Annually 8,357,100 people receive support from the 5 main long-term care service; home health agencies (4,742,500), nursing homes (1,383,700), hospices (1,244,500), residential care communities (713,300) and adult day service centers (273,200).
- The lifetime probability of becoming disabled in at least two activities of daily living or of being cognitively impaired is 68 percent for people age 65 and older.
- By 2050, the number of individuals using paid long-term care services in any setting will likely double from the 13 million using services in 2000, to 27 million people.
- Among the population aged 65 and older, 69 percent will develop disabilities before they die, and 35 percent will eventually enter a nursing home.
- Individuals 85 years and older, the oldest old, are one of the fastest growing segments of the population. In 2012, there are an estimated 5.9 million people 85 and older in the United States. This figure is expected to increase to 19.4 million by 2050. This means that there could be an increase from 1.6 million to 6.2 million people age 85 or over with severe or moderate memory impairment in 2050.
How the Cost of LTC Threatens Your Nest Egg
Nationwide, the average cost of a year in an LTC facility for 2017 was just over $80,000. Residents of Illinois enjoy average LTC rates that are a bit lower than the national average at around $75,000 per year; however, with an average length of stay of 2.5 years, that still puts the projected costs of LTC at over $200,000 – and that is if you need LTC today. Experts predict that the same LTC stay will cost you closer to $400,000 in 30 years. Don’t count on Medicare to help because the program doesn’t cover LTC expenses except following a hospital admission and then for no more than 100 days. Most basic health insurance policies also exclude LTC expenses. Unless you purchase an LTC insurance policy, at a significant cost, that only leaves two options for covering your bill if you (or a spouse) need LTC in the future – qualifying for Medicaid or using your retirement nest egg.
How to Hold Onto Your Nest Egg
If you aren’t too keen on the idea of using your nest egg to cover an LTC bill, Medicaid is your only other option. Qualifying for Medicaid, however, can be challenging and can also threaten your nest egg unless you plan ahead. Medicaid’s “countable resources” limit means you cannot own valuable, non-exempt assets at the time you apply or you will be denied and expected to “spend-down” your excess assets until they are low enough that you meet the eligibility requirements. At the same time, you cannot simply transfer those assets to adult children or other beneficiaries because Medicaid also uses a five-year look-back rule that prohibits asset transfer for less than fair market value for the five year period prior to your application. If you made a transfer, Medicaid may impose a waiting period during which time you are ineligible for assistance from Medicaid.
In either scenario, you will be forced to use your own hard-earned assets that were meant to be your retirement nest egg to pay for your LTC bill. The way to avoid the loss of your assets is to include asset protection strategies and Medicaid planning in your comprehensive estate plan.
Contact Lincolnshire Asset Protection Lawyers
Please download our FREE estate planning worksheet. If you have questions or concerns regarding asset protection or Medicaid planning, contact the experienced asset protection lawyers at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.