Always Prepare for Long-term Care

Physician's Money Digest, June2005, Volume 12, Issue 9

Financially speaking, planning foryour future entails a certaindegree of foresight. It's hard to sitdown and accurately predict exactlywhere you'll be several years down theroad. When you think about buildingyour nest egg, you probably have goalsin mind for what you want to accumulate,and you may even have ideas onhow you will spend that money.

Unfortunately, many physician-retireeswill likely be affected in one way oranother by a serious illness or injury thatwill require some form of long-term care.The prospect of depleting your hardearnedretirement funds to pay for suchcare is frightening. However, if you takethe time now to plan ahead, you can befinancially prepared should you ever findyourself facing this type of situation.

Funding for long-term care can beexpensive, depending on the length oftime and the specifics of the type ofcare required. For these reasons, youshould be careful to assess a variety ofpossibilities and develop a plan thatcould cover different situations. The followingare three basic ways you canfund long-term care:

•Personal Insurance—If you haveassets that can easily be converted tocash, you can plan for long-term care bysetting aside a special fund just for thatpurpose. Investments such as an IRA oran annuity provide a means for moneyto accumulate until an illness occurs. Themain advantage of insuring yourself thisway is that the money will be availablefor other purposes if you never need itfor long-term care. On the other hand,the main setback of setting aside yourown funds is the possibility of fallingshort in your savings, causing you to dipinto other funds to pay for long-termcare. Also keep in mind that taking largedistributions from an IRA could affectyour income taxes. If you take it uponyourself to establish the funds, makesure you plan carefully so you will haveenough if you need it.

•Medicare, Medicaid, and HealthInsurance—Many people believe theycan count on their current health insurance,Medicare, or Medicaid to pay forlong-term care expenses. Unfortunately,most health insurance policies do notcover the costs associated with long-termcare. While Medicare offers medical benefitsto eligible seniors, its long-term carebenefits are very limited. Medicaid,designed for individuals who do nothave the income or assets to pay forlong-term care, requires that you firstdeplete most of your assets, with limitedexemptions, before you can qualify.Relying on any of these options couldput you in a bad position if you eventuallyrequire long-term care.

•Long-Term Care Insurance—Whileproviding tax-free benefits, long-termcare insurance offers specific protectionagainst the high costs of extendedhealth care. For a simple monthly premium,you get a policy that pays a fixeddollar amount for care you can receive ina variety of settings, including your ownhome. This specialized insurance canhelp you avoid spending your assets, andmay even allow you to maintain yourlifestyle without suffering from thefinancial burden of long-term care costs.

Joseph F. Lagowski

is vice president,

investments, and a financial

consultant with AG Edwards in

Hillsborough, NJ. He welcomes

questions or comments at 800-

288-0901 or www.agedwards.

com/fc/joseph.lagowski. This article was provided

by AG Edwards & Sons, Inc, member SIPC.