As the Baby Boomer generation enters their golden years, the challenges of funding long-term care (LTC) for the aging population are becoming increasingly apparent. Despite the fact that 70% of individuals over the age of 65 will need some form of long-term care in their lifetime, a vast majority of seniors have made no plans or preparations for this inevitable stage of life.

Newsmax Finance Editor Lee Barney interviewed Chris Orestis, president of Retirement Genius, to ask about the challenges facing seniors in retirement and discuss potential solutions to fund their long-term care needs.

Newsmax Finance: Let's start by discussing the lack of preparation among seniors for long-term care. Why do you think people delay or avoid planning for their future care needs?

Chris Orestis: There are several reasons why people tend to delay or avoid planning for long-term care. First, there is a general lack of awareness and understanding about the costs associated with long-term care and how to pay for it.

Many seniors are not well-informed about the types of care available and what is covered by different funding sources. Additionally, there is a common misconception that they won't need care in the future, with around 85% of seniors believing they won't require long-term care.

NF: That's a significant challenge. Can you provide some insights into the costs of long-term care and who typically pays for it?

Orestis: The costs of long-term care can vary depending on the type of care needed. On average, home care costs around $5,000 per month, assisted living facilities cost approximately $4,500 per month, and skilled nursing facilities range from $7,900 to $9,000 per month for a semi-private or private room.

When it comes to funding sources, entitlement programs such as Medicaid and Medicare cover a portion of long-term care costs, accounting for 35% and 25% of funding, respectively. Private pay requiring out-of-pocket expenses is 33% of the funding, and long-term care insurance (LTCi) make up 4% of care provided.

NF: How do social safety nets, such as Social Security and Medicare, factor into retirement and long-term care funding?

Orestis: Social Security plays a significant role in retirement income, with 52 million people aged 62 and above collecting benefits. Half of the households rely on Social Security for at least half of their income, and for 25% of households, it constitutes 90% of their income. Medicare, with 64 million people aged 65 and above enrolled, provides healthcare coverage but does not cover senior living and long-term care. Medicaid, with 88 million enrollees, includes long-term care coverage, but eligibility requires meeting specific financial criteria.

NF: Navigating the complex system of long-term care funding can be overwhelming. How can seniors and their families navigate this system effectively?

Orestis: It's true that navigating the long-term care system can be challenging. It's important to understand that Medicare and traditional health insurance do not cover senior living and long-term care services. Medicaid, while providing coverage for those with limited resources, often requiring a spend-down of assets to poverty levels and has restrictions on care options available.

For individuals who want more control and financial protection, private pay becomes the primary option. Exploring long-term care insurance is a viable solution particularly while someone is still young and healthy. However, it's worth considering other options as well, such as utilizing existing life insurance policies or annuities.

NF: That's interesting. Can you elaborate on how life insurance policies and annuities can be utilized to fund long-term care?

Orestis: There are currently 7.5 million in-force long-term care insurance policies and 255 million in-force life insurance policies in the United States and there is $2.53 trillion held in annuities.

Seniors who have life insurance policies they no longer need or cannot afford can explore options like life settlements. By selling their life insurance policies instead of abandoning them, they can receive a lump-sum payment that can be used to fund long-term care expenses. Additionally, annuities can be a vehicle to convert the value of these policies into a reliable income stream that covers long-term care costs and will protect the money from the downturns of a volatile market.

NF: Can you shed some light on a few other potential solutions, such as the Veteran's Aid & Attendance Benefit, Reverse Mortgages, and Senior Bridge Loans?

Orestis: When it comes to funding long-term care, it is crucial to explore various financial options from a wide range that can alleviate the burden of costs. One such option is the Veteran's Aid & Attendance Benefit, which is available to veterans of active combat duty and their spouses. This benefit provides monthly payments directly towards qualifying long-term care services. However, it's important to note that in addition to service requirement, applicants must meet medical necessity and income/asset level limits to qualify.

Another option is a Reverse Mortgage, specifically the Home Equity Conversion Mortgage (HECM). This loan is available to homeowners who are aged 62 or older and have little to no remaining mortgage balance. The loan allows homeowners to access the equity in their home without needing to sell it in the form of a lump sum, monthly income, or a line of credit. The loan is backed by the Department of Housing and Urban Development (HUD), there are no requirements for monthly payments, and repayment is typically made after the homeowner's passing through the sale of the property, including interest and fees. To qualify, the home must still be the primary residence.

Lastly, Senior Bridge Loans are another option for securing funds for long-term care services. These loans are specifically designed to bridge the time it takes to sell a home while receiving care and are typically secured by the home that is up for sale or guaranteed by family members who co-sign.

NF: In conclusion, what would be your key advice for seniors and their families facing the challenge of funding long-term care?

Orestis: My advice would be to start planning and exploring options as early as possible. It is crucial for individuals and families to understand the range of available financial options and the differences between coverage provided by Medicare, Medicaid, or private pay. Planning ahead as much as possible is ideal, but there are also options available to address sudden and immediate needs for long-term care.Bottom of Form

Educate yourself about the costs of care, understand the available funding sources, and consider engaging with a financial advisor who specializes in retirement planning and long-term care funding. By taking proactive steps, seniors can secure their future and ensure they have the necessary resources to maintain their well-being in their later years.
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Chris Orestis, Retirement Genius is a nationally recognized senior care advocate and expert in retirement, long-term care and specialty senior living funding solutions. The author of two books, numerous published papers and articles, and a frequent industry speaker; he is the innovator that brought the LTC Life Settlement into the market over a decade ago.