Insights + Resources

Eldercare Choices in the COVID-19 Era

Jun 3, 2020

eldercare tree
Exploring your extended care options may be wise at this time

Given the threat of COVID-19, seniors today may be considering their eldercare alternatives with extra caution.

In addition to health factors, the cost can be an issue. According to Genworth’s 2020 Cost of Care Survey, the median annual cost of a semi-private room in a nursing home is now $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 possible extended care costs, there are other choices to consider as well.1

Many extended care insurance policies now 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 an insurance professional with an eye on industry trends.2

Another possible option – a Health Savings Account (HSA). This 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 yet enrolled in Medicare.3,4

HSA dollars can be used to pay for assorted eldercare medical expenses, including prescription drugs, dental care, and therapies. HSA funds can also 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, $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 If you make such a withdrawal before you turn 65, the withdrawn amount is usually subject to a 20% federal tax penalty.4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, it will pay for no more than 35 hours a week of home health care and only 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 eldercare options. As always, your financial professional is a knowledgeable ally, as you consider which strategies may help you meet this challenge.

More Insights

May 12, 2021

The San Diego Padres signed infielder Fernando Tatis, Jr., to a 14-year, $340 million contract roughly one year after the Los Angeles Dodgers inked outfielder Mookie Betts to a 12-year, $365 million deal. That brings the total to 8 baseball players who have signed long-term, $300+ million contracts. Think he needs estate planning?

May 10, 2021

What does it mean when two of the most powerful voices in American financial life seem to be saying two different things? In one corner, we have the “Oracle of Omaha,” investor Warren Buffett. As one of the nation’s richest people and most frequently sought opinions on business matters, he’s a voice that gets a … Continue reading “Buffett and Powell Talk Inflation”

May 7, 2021

How can you help cover your child’s future college costs? Saving early (and often) may be key for most families. Here are some college savings vehicles to consider

May 5, 2021

Will your retirement dreams match your reality? That’s perhaps the most critical question to ask people who are currently retired. Was your retirement what you expected, or was it something else?

May 3, 2021

A recent survey charting investor sentiment shows that 63% of investors are more interested in protecting their financial assets and planning for uncertainty in the future than anything else.1 There are many reasons for this change, but here are a few of the most impactful to keep in mind.

Insights + Resources >