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Planning for Long-term Care?
By Lewis L. Wilson CPIA CIC
DID YOU KNOW THAT:
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By
2020, one out of six Americans will be over 65?
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More
than six million elderly Americans today need assistance from
family and friends?
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The
average nursing home stay is two and a half years and costs
$50,000 per year ($136 per day)?
More important, do your clients know these facts? Long-term care
insurance is a viable alternative for many individuals and an
integral part of planning for the future.
As baby boomers get closer to retirement age, there's been a shift
in public policy, with more focus on assuring the solvency of such
programs as Medicare and Social Security that provide life security
to Americans. In so doing, both Democratic and Republican lawmakers
have signaled that it's critical for Americans to assume personal
responsibility for planning their long-term care and security.
Long-term care (LTC) is best defined as ongoing nursing, social, and
rehabilitative personal care, or services provided in a nursing
home, one's own home, or an alternative site, such as an
assisted-living facility. Many people underestimate the costs of LTC
and don't plan adequately for their future. Planning for LTC is
crucial to retirement security plans because without it, individuals
may be faced with insurmountable long-term care costs that can
quickly deplete their life savings.
It's a common misconception that either Medicare or major-medical
insurance will cover LTC expenses. Medicaid covers LTC only after a
person "spends down" his or her assets to qualify for assistance.
Families are at risk of forfeiting hard-earned assets to pay for a
loved one's long-term care needs.
In June, legislation was introduced in the House by Reps. Nancy
Johnson (R-CT) and Karen Thurman (D-FL) that would phase in a tax
deduction (up to 100 percent) for private long-term-care insurance
premiums. The legislation proposes making LTC insurance premiums
fully deductible for policyholders who pay at least half the cost of
a tax-qualified policy. Premiums would be 50 percent deductible the
first year, with an additional 10 percent deduction per year until
the premiums become 100 percent deductible in the sixth year. The
deduction would stay at the highest level for as long as the
individual maintains the policy. Seniors 60 years and older would
get the full deduction in four years instead of six.
Historically these types of tax incentives have proved to be a sure
and fair way to encourage people to take personal responsibility for
their eventual long-term care needs.
The importance of this issue is underscored in a New York Times
article (January 11, 1999) that states: "The issue cannot be put off
for long as millions of baby boomers begin facing potentially huge
long-term care costs for themselves or their parents."
PIA National is working with Congress to make sure legislation is
passed that makes purchasing LTC insurance not only attractive but
also imperative.
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