Financial planning is a life-long endeavor, and there’s more to it and then just retirement. You also need to take into consideration your health and your quality of life. As people live longer, that means planning for many more years of life — years that could potentially be spent in decline.
No one likes to think of losing their independence, but most people will, at some point, require long-term care. These services can be in-home care provided by family, visiting nurses, or other caregivers, or these services can be provided by part- and full-time assisted living facilities.
Long-term care is very expensive, and it’s not covered by medical insurance or Medicare. It is covered in some states by Medicaid, but that’s only available after you’ve spent all of your assets and are in desperate need.
So how should you go about planning for your long-term care needs? Federal employees have an important benefit available, but it’s not necessarily a great choice for everyone. Here’s what you need to know.
The Federal Long-Term Care Insurance Program
The Federal Long-Term Care Insurance Program (FLTCIP) is a special insurance program available to federal employees as well as active or retired military personnel. The FLTCIP covers payments to nursing homes and other services related to long-term care, either in or out of your home. Rates are based on several factors, including:
- Your age
- Daily benefit amount (i.e., how much your policy will pay for each day you require care)
- Benefit period (i.e., how many years of care your policy covers)
It’s important to understand that the FLTCIP is a use-it-or-lose it program: If you don’t end up needing long-term care in your lifetime, you will lose the money you paid out in premiums. Therefore, choosing the right amount of coverage is crucial so you don’t overpay. You’ll need to carefully research long-term care costs in your area and understand your needs. For example, women tend to live longer and spend more time in long-term care than men, and your health conditions can offer a clue about your future needs.
It’s also important to note that the premiums for the FLTCIP can increase over time as the cost of care rises. You’ll want to plan ahead for these increases so you’re not blindsided by them in years to come. Likewise, you’ll want to consider the impact of inflation on your coverage and adjust your policy as needed. The FLTCIP offers an automatic inflation adjustment option, or you can opt in to future increases.
To better understand all of your options within the FLTCIP system, check out these informative webinars.
Weighing All Your Options
As a federal employee, you’re probably used to having your benefits ranked among the best in the country. However, you should definitely shop around when it comes to choosing long-term care (LTC) coverage.
Private LTC insurance often takes into account sex as well as age, because women tend to need more long-term care than men. For this reason, women will often pay higher premiums. Because FLTCIP doesn’t take sex into account, women may be able to get a great deal through the federal program, while men can often save money by shopping around.
Private LTC insurance and FLTCIP coverage can both hike premiums over time, leaving you short on cash if you’re not careful. For this reason, you may prefer alternative coverage for long-term care planning:
- Shared LTC Plans: These options allow spouses to pool their LTC coverage. Spouses apply at the same time and can share benefits. This helps alleviate the “use-it-or-lose it” problem, as a surviving spouse can still access remaining benefits for the rest of their lifetime.
- Hybrid Life Insurance/LTC Plans: This type of coverage combines a whole life insurance plan with LTC coverage. Your premium provides a long-term care benefit and a death benefit, so you don’t lose the value of your premiums if you never need long-term care. Hybrid plans are attractive because premiums don’t go up, but LTC coverage is often less flexible and more expensive than a pure LTC insurance plan. It also provides a death benefit to your heirs.
- Long-Term Care Riders: Some whole life insurance policies offer additional riders that allow payouts for long-term care. These payments will likely reduce the death benefit to your heirs but can be a helpful option if you’re looking to avoid rising premiums.
- Self-Insurance: If you’ve been saving diligently for your retirement and have taken advantage of your other federal benefits, you may be able to afford your long-term care needs on your own, without the additional expense of insurance. Your Social Security income, pension, and TSP savings may already provide sufficient coverage. You may also already have a life insurance policy with accelerated death benefits that allow you to tap into your benefit while you’re still alive to pay for medical expenses.
Before choosing any LTC insurance option, run the numbers. A thorough needs assessment will help you calculate the cost of long-term care in your area and show you several different scenarios based on how long you need care. From there, you can review your savings and investments to see if you can afford the costs outright or if additional insurance coverage is right for you.
Long-term care is expensive, but so is LTC insurance. You don’t want to pay for coverage you don’t need, so don’t assume that the FLTCIP is automatically right for you. An alternative plan could save you money while providing substantial peace of mind.
If you’d like help planning for your future, we’re here for you! Get in touch today to discuss your options and come up with a plan that works for you and your family.