Long-term care costs can deplete a lifetime of savings in years. Learn the options available to self-employed people for funding potential care needs, from insurance to self-funding strategies.
Long-term care — nursing home, assisted living, or in-home care — is one of the largest potential expenses in retirement. The average nursing home cost in the US exceeds $90,000 per year. Without insurance or savings, a multi-year care need can deplete a lifetime of savings in months.
For the self-employed, this is particularly acute: no employer-provided benefits means every risk must be self-funded.
Approximately 70% of people over 65 will need some form of long-term care. The average duration of care need: 2.5 years. For those with more severe needs, 5+ years is common.
Long-term care insurance: Traditional LTCI policies pay a daily benefit for qualifying care. Premiums are expensive and increase with age. Best purchased in your 50s before premiums escalate or health issues make coverage unavailable.
Hybrid life insurance with LTC rider: Life insurance that also pays out for long-term care if needed. If you do not need care, the death benefit pays out. More expensive per dollar of LTC coverage but eliminates the use-it-or-lose-it problem.
Self-insurance: Simply accumulate enough wealth that you can self-fund care costs. Works if you reach $1.5-2 million in assets. At that point, even years of care does not deplete savings entirely.
Health Savings Account: The HSA is the only account that can pay long-term care premiums tax-free. Building a large HSA in earlier years and using it for LTC in later life is a powerful strategy.
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