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Is Long-Term Care Planning or Insurance a Better Option?

There are multiple ways that someone can be ready for the costs involved in long-term care as they get older. Planning for a way to cover these costs is important, as most people saving for retirement will not be able to save enough to cover the costs of several years of nursing home care.

The two most common ways that people begin to prepare for these expenses are probably long-term care planning and purchasing special insurance for long-term care needs later in life. You may find yourself wondering which of these two approaches will be better for your financial stability and security as you age.

A number of factors will influence whether careful financial planning, insurance or a combination of the two will be the best option in your case.

How close are you to retirement age?

As with life insurance, the costs associated with long-term care insurance increase substantially as you get older, with rates nearly doubling between the ages of 60 and 65. After all, purchasing a policy in your sixties could mean only paying premiums for a decade or two before you need expensive benefits that will cost the insurance company money.

The earlier it is in your career and the further you are from retirement, the more affordable long-term care insurance may be for you to carry. Provided that you can lock in the rate and ensure a reasonable amount of coverage in the future, long-term care insurance can be a valuable tool for some. You can also reduce the coverage you have, but that could still leave you with significant financial gaps.

Asset protection and long-term care planning make sense if you are older

If you are already at or past the age of retirement, securing long-term care insurance may be cost-prohibitive. Beyond that, you will have to worry about your assets and what insurance coverage you can qualify for as you get older.

Long-term care planning often involves the careful restructuring of the ownership of certain assets, including investment accounts and even your primary residence. Moving assets into a trust or transferring them to your loved ones can be a way to protect those assets from claims made by medical providers or Medicaid. The sooner you begin the planning process, the more you’ll be able to reduce your financial risks associated with long-term care.