Eldercare Choices in the COVID-19 Era
Exploring your extended-care options may be wise at this time.
Given the threat of COVID-19, retirees and pre-retirees alike may want to consider their extended-care alternatives with extra caution.[1]
In addition to health risks, the cost can be an issue. According to Genworth’s 2020 Cost of Care Survey, the median annual cost of a semiprivate room in a nursing home is $90,000. A single-occupancy room may cost over $100,000 a year.[1]
While you could designate a portion of your retirement savings for potential extended-care costs, there are other choices to consider.[1]
Many extended-care insurance policies reimburse the cost of eldercare provided at home. While traditional extended-care policies are becoming rare and more expensive, some insurers are bundling extended-care features into other policies, with the goal of making such coverage more accessible. A look at different policies may be illuminating, especially with help from a professional with an eye on industry trends.[2]
Another possible option—a health savings account (HSA). An HSA is a tax-advantaged savings account designed to help pay for medical expenses. You are eligible to have an HSA if you have a qualifying high-deductible health plan (HDHP) and have not enrolled in Medicare.[3,4]
HSA dollars can be used to pay for assorted medical expenses, including prescription drugs, dental care, and therapies. HSA funds can be applied to premiums for extended-care insurance.
You defer pre-tax income into your HSA, which may be invested for you over time. There are annual HSA contribution limits. In 2020, they are $3,550 if you are single and $7,100 if you have a spouse or family. An additional annual “catch-up” contribution of up to $1,000 is allowed for each person in the household over age 55.[3,4]
Money taken out of an HSA for a nonmedical reason is considered taxable income. If you make such a withdrawal before you turn 65, the withdrawn amount is usually subject to a 20% federal tax penalty.[4]
Medicare may not suffice if you need extended care. Generally speaking, Medicare will pay for no more than 35 hours a week of home health care and up to 100 days of nursing home care after a hospitalization. It may pay for up to six months of hospice care. If you or someone you love has dementia and needs to move into an assisted-living facility, Medicare may not pay their room and board.[5]
Medicaid is different: In some instances, it can pay for certain extended-care expenses. Qualifying for Medicaid is the hard part. It is public assistance, offered to people who can no longer pay for extended care with insurance or their own funds.[5]
Think ahead and take some time to explore extended-care options. Your financial professional can be a knowledgeable ally as you consider which strategies may help you meet this challenge.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations
Genworth, March 30, 2020
Nerdwallet, May 28, 2019
CNBC.com, February 4, 2020
Investors.com, November 8, 2019
Medicare.gov, July 2019
Parkshore Wealth Management is a family-owned, independent, fee-only Registered Investment Advisor serving the greater Sacramento area with an office in Roseville, CA. We partner with financially responsible individuals and families who are eager to take positive steps that will allow them to use their money to build the life they desire. The firm is led by Harold Anderson, CFP®, and Daniel Andersen, CFP®, both members of NAPFA, the country's leading professional association of fee-only financial advisors.