How to Save for Long-Term Care When You Live with a Disability

(written by Ed Carter)

According to the U.S. Department of Health and Human Services, a person turning age 65 today has nearly a 70 percent chance of needing some type of long-term care in their remaining years. If you have a disability, that chance rises. Long-term care isn’t cheap, and many Americans are wildly unprepared for the costs. Depending on the type received, the median annual cost of long-term care runs from $17,680 to as much as $92,378. These are just numbers from 2016 -- the costs of healthcare increase every year.

For many people, long-term care insurance is the answer to their financing troubles. However, the premiums can be expensive, and if you already live with a disability, you are far less likely to be granted a policy. Because of this, people living with disabilities turn to alternative savings plans.

Medicare and Medicare Enrollment

While Medicare doesn’t pay for many of the expenses associated with long-term care, it’s still important for people with disabilities to take advantage of the federal insurance program. Doing so can help cover healthcare costs so you can allocate that money toward savings. But Medicare enrollment and benefits aren’t always easy to understand. For example, if you are younger than 65 and receive Social Security benefits for disability, you will be automatically enrolled in Medicare if you have received disability benefits for 24 months. On the other hand, depending on your age and current state of benefits you may need to manually enroll. This year’s enrollment period for 2020 runs from October 15th through December 7th of 2019.

If you have trouble making heads or tails of coverage options, look to a Medicare adviser to help you get the coverage you need.

Reverse Mortgages

Your home can be a huge asset when it comes to paying for your long-term care needs. A reverse mortgage isn’t the best option for everybody, but if you fully understand the pros and cons of the decision, it can be a helpful source of cash later in life. When looking at a reverse mortgage, you should consider these factors when deciding if this is the right option for you.

The Pros:

  • Even if your debt exceeds the value of the property, you still have the right to live in your home under a reverse mortgage.

  • There’s no more requirement to make house payments.

  • You only need a modest credit score to qualify.

  • It establishes a line of credit for your long-term care needs, or provides you with a lump sum for your equity immediately.

The Cons:

  • You no longer own your home.

  • You can only get a reverse mortgage if you are over 62.

  • If someone else lives in your home, they may not be able to stay after you pass.

  • Reverse mortgages decrease the amount of equity you have in your property over time.

Other Ways to Pay

As you start to plan ahead for your future, consider turning to your pension or IRA to cover the costs of long-term care. Or if you have a whole life or term life insurance policy, look into adding a chronic illness rider. For veterans who served during war time, you may be eligible for the Aid and Attendance benefit, but your net worth determines how much you can receive in benefits. There are a variety of avenues to look at when it comes to long-term care financing, so be sure to do your research.

Talking with Your Family

As you start to assess your plans for long-term care and your future health situation, now is also the time to sit down with loved ones to discuss your plans and what you want when it comes to end-of-life care and arrangements for when you die. Doing this now enables you to let everyone know what you want and gives them peace of mind for knowing how to proceed. If you anticipate a difficult conversation, put together a checklist to help you stay on track and find a time when you think you and everyone else are emotionally ready.

Long-term care is expensive, but likely necessary for adults with disabilities. While insurance helps many Americans cover the costs of long-term care, those with a disability have a hard time buying policies. Take advantage of Medicare to reduce medical expenses and add to your savings, while using assets such as property to source extra funding.