Prepare Today for Possible Long-Term Care Expenses

Whether retirement is a current reality or a dream you are working toward, the fact that average life expectancies are going up is news we can all cheer about. However it also means more people may be worrying about living longer than our wealth may support us.

No one wants to think about being incapacitated by a health problem later in life. Yet 2015 estimates from the Centers for Medicare & Medicaid Services say 70% of Americans who reach age 65 will need some form of long-term care; 40% will need nursing home care at some point; and the average duration for long-term care is three years.

Plus, the cost for care can add up quickly. According to the Genworth 2015 Cost of Care Survey, the current annual median cost (nationwide) for a private room in a nursing home is $91,250. If costs continue to increase 4% each year, the bill for care in that same room will be a little more than $135,000 per year in 2025 and almost $200,000 per year in 2035.

To help protect your wealth from having a big bite taken out of it by possible long-term care expenses, long-term care insurance may be a practical to consider, given your alternatives.

For example, Medicaid may not be desirable, because you must spend most of your money and liquidate most of your property and investable assets to qualify. Then as a Medicaid patient you give up control over where and how you receive care.

If you do not want to pay premiums on a long-term care policy you may never need, you can always self-insure. However to avoid becoming a burden on others, you need to set aside a considerable amount. Which may cause you to divert assets from your other equally important goals — such as creating retirement income or providing a financial legacy for loved ones and the worthy causes you support. 

A solution that provides funds for long-term care expenses while providing a tool to help protect and transfer wealth to the people you care about is a life insurance policy, with a long-term care rider. This option offers flexibility, convenience and value. 

Other innovative insurance strategies are also available. Regardless of the approach you choose, preparing for long-term care costs may help you feel more confident about your financial security in retirement. So you may be better able to relax and enjoy the lifestyle you envision.

Please contact your RBC Wealth Management financial advisor today to learn more about long-term care strategies and solutions or use the advisor locator tool to find an advisor near you.

RBC Wealth Management is not a tax advisor. All decisions regarding the tax implications of your individual investments should be made in connection with your independent tax advisor.

Important disclosure information about Royal Bank of Canada (RBC) and RBC Capital Markets, LLC