Protecting Your Retirement Savings from Long-Term Care Costs
As you approach retirement, you may be wondering how to safeguard your hard-earned savings from the potentially devastating costs of long-term care. With the average daily cost of a semi-private room in a skilled nursing facility exceeding $94,000 per year, it’s essential to have a plan in place.
Understanding the Risks
A $350,000 account could be depleted in just a few years if both members of a couple require semi-private rooms in skilled nursing facilities. However, this scenario is not inevitable. Most people don’t incur nursing home bills of this magnitude, and there are ways to mitigate the risk.
Government Assistance and Financial Tools
Medicare, the national healthcare program, covers up to 100 days of nursing home care in most cases. Medicaid, the federal-state healthcare program, will cover nursing home stays of indefinite length for those with limited financial means. Additionally, long-term care insurance, annuities, life insurance, and health savings accounts can provide financial protection against nursing home costs.
Medicaid Eligibility and IRAs
To qualify for Medicaid, you must have very limited financial resources. In some states, IRAs are not included when determining Medicaid eligibility, but in most cases, they are considered assets. You may need to spend nearly all the money in your retirement fund before Medicaid will pay for nursing home care.
Strategies for Protecting Your IRA
If you have too many assets, you may be able to satisfy Medicaid’s means test by gifting assets to a family member. However, you must do this at least five years before applying for Medicaid. A qualified income trust can also help if your income is too high. This type of trust designates a portion of your income for medical purposes, allowing you to deduct it from your income and meet Medicaid’s income limits.
Other Options for Paying for Long-Term Care
In addition to Medicaid and long-term care insurance, you can explore other options, such as home equity loans, reverse mortgages, and health savings accounts. A financial advisor can help you create a plan to reduce risks in your retirement.
Taking Control of Your Retirement
Don’t let the fear of long-term care costs deplete your IRAs. By understanding the risks and exploring your options, you can protect your retirement savings and ensure a secure financial future. Consider discussing your concerns with a financial advisor and creating a plan to reduce risks in your retirement.
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