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Can retirees afford long-term care insurance?

There are several ways for retirees to cover the cost of long-term care insurance.  Getty Images

Retirement is an exciting time. But, it also comes with its challenges. One such challenge is the high probability that you'll need long-term care in your golden years. That care includes services like nursing homes and home health aides, which can be expensive. That's what makes long-term care insurance such a valuable product. These insurance policies can help cover the tens or even hundreds of thousands of dollars per year in expenses associated with your care when you need it. 

But, long-term care insurance comes with premiums that you'll typically have to pay until you develop a need for care. And, the cost of those premiums usually grows alongside age. So, if you're a retiree and don't already have long-term care insurance, you may be wondering whether or not you can afford a policy. 

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Can retirees afford long-term care insurance?

At 65 years old, long-term care insurance may come with premiums ranging from $2,749 to $4,599 or more per year. Of course, your actual cost will depend on the features of the insurance policy you choose and other factors like your gender, age and health status. 

Nonetheless, adding a few hundred dollars of expenses per month to your budget may be difficult if you're a retiree on a fixed income. But, there are things you can do to make sure you can afford coverage. Here are some of the most effective ways to pay for long-term care insurance as a retiree: 

Tap into your life insurance's cash value

One way to cover the cost of long-term care insurance in retirement is to lean on your current life insurance policy. "You can sell an existing permanent life policy and sometimes even a term life policy to a 3rd party for a lump sum payment and then use the proceeds for LTC expenses or anything you want," explains Kelly Augspurger, CLTC, CSA and instructor for Certification for Long-Term Care, an education company that certifies long-term care insurance agents. "These are called life settlements."

And, you may not have to sell your life insurance policy to a third party. You could surrender your policy as well. However, Augspurger says that if you sell your policy to a third party, "you could get more money than surrendering the policy for the cash value." So, you should compare your options before deciding how you'll access the cash value of your life insurance policy. 

Purchase a long-term care insurance policy now to make sure you're covered later

Tap into your HSA

You may also want to consider using your health savings account (HSA) to cover the cost of your long-term care insurance. These are tax-advantaged accounts that are designed to compliment high-deductible health plans. 

With an HSA, "you can pay for qualified medical expenses (co-pays, deductibles and services not covered by insurance) and long-term care insurance premiums," says Augspurger. 

Consider a reverse mortgage

If you own your home, you could use a reverse mortgage to pay your long-term care insurance premiums. These lending products give seniors a way to access their home equity while they live in their homes. When they leave (whether that be when they move out or when they die), the money borrowed as part of the reverse mortgage plus all outstanding fees and interest will typically be paid through the sale of the home. 

The good news is that with a reverse mortgage, "the homeowner can use the money however they want to without restrictions," explains Augspurger. "They can pay for care and/or pay long-term care insurance premiums."

Lean on your children and loved ones

If you're not a homeowner and you don't have life insurance or an HSA to lean on, you may want to consider reaching out to your children and other loved ones. Explain to them that you'd like to purchase long-term care insurance and that this insurance will protect your ability to age how and where you want to. Explain that it can also help your loved ones because with long-term care insurance, you won't need to lean as heavily on them for financial assistance. And, if you do, your insurance may pay them for their help. Then, talk about the cost of the premiums and how much of that cost you can afford and ask if they'd be willing to help with the difference. 

The bottom line

Long-term care insurance gives you the peace of mind in knowing that you'll be able to afford care later in life if you need it. But, if you're a retiree on a fixed income, it can be difficult to pay the premiums. If that's true for you, consider using your life insurance cash value, tapping into your HSA or using a reverse mortgage to pay your premiums. And, if those aren't options, consider leaning on your loved ones to help bridge the gap between your premiums and what you can afford to pay. 

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