Thursday, November 27, 2008

How You Can Finance Your Long-Term Care

There are four basic ways to finance your long-term care:
  1. Family support and caregiving. This is the way long-term care has been provided for generations. While all of us like the idea of taking care of our parents as they age or being taken care of by our children, this is simply not a viable option for most Americans today
    who have jobs and/or children of their own.
  2. Personal savings. This is not a viable option for most people because they do not have millions of dollars available, nor do they know how much long-term care they will need. It is also selfish if your estate will be needed to support your spouse or children after you are gone.
  3. Home equity options. This is an increasingly popular method, particularly with the advent of reverse mortgages, but it has the same limitations as personal savings. In addition, most people would prefer to live out their later years in a place other than a full-size home (e.g., in a retirement community).
  4. Private long-term-care insurance. This is my favorite choice for financing long-term care. Insurance is the ideal method to finance unknown risks that can be predicted in the aggregate using actuarial information.

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