01 Dec Retirement and long-term care needs

Q. I want to retire as soon as possible. I’m 57 and my wife is 60. We have saved about $1 million and we own our home, and we don’t have big expenses — we’re frugal. I’m worried that we don’t have enough because my wife’s parents and her aunts had dementia and needed long-term care. I don’t think we could afford the long-term care insurance. How can we plan?
— Retirement eager

A. Retirement planning is complex, and you have to juggle a lot of balls to get it right.

Before we get to the long-term care question, it’s very important to have a good understanding of your overall income, expenses and assets when you create your retirement plan. This can require a significant time commitment up front, but can provide you with added confidence that your retirement plan will be successful.

As such, you should consider enlisting a qualified financial professional to help ensure that your assets are invested appropriately to achieve both the long-term rate of return you will need to earn to meet your objectives and to properly manage risk.

The possible need for long-term care is one of those risks.

It sounds like you are doing a great job of controlling your expenses, but it will also be critical to work on creating a basic budget that details all current and expected income and expenses now and in retirement, said Peter O’Neill, a certified financial planner with Beacon Trust in Morristown.

The exercise can help to quantify if you are projected to have surplus cash flow on an annual basis, O’Neill said, and this can give you an idea of how much in the way of long-term care premiums you may be able to afford.

“Long-term care (LTC) policies range quite a bit in terms of cost, the benefits they provide and how long those benefits are provided,” O’Neill said. “LTC policies that are not overly cost prohibitive may cover a portion of the cost for an individual that has a long-term care need for two or three, however people that suffer from dementia may need to spend several years in a costly nursing home.”

O’Neill said unfortunately, policies with longer coverage periods, significant benefit amounts and inflation protection have become expensive.

Depending on the health issue and the level of care needed, a lower-cost alternative to nursing home care could be to stay at home and have a home health aide come to the house to provide assistance.

“You could obtain a lower benefit LTC policy to cover the hourly fee of the aide — $20-$25 per hour would be a fair estimate of the cost for a home health aide in New Jersey — and potentially supplement this care with the help of family members,” O’Neill said. “A policy like this could help fill the gaps of family availability.”

He said if possible, staying in your home and having access to family member care in addition to professional care may serve as a good middle-ground in terms of controlling costs as well as not putting too much of a burden on family members.

“With a significant percentage of people over the age of 65 needing some form of long-term care, it is important to be knowledgeable about the different alternatives for care, and the impact that not having coverage may have on your overall financial picture if a long-term care need arises,” he said.

Consider meeting with a pro who can help you assess your overall financial situation, what kind of care your savings could cover if you self-insure and whether a long-term care policy would be an appropriate investment for you.

Email your questions to .

This post was first published in December 2017.