When you think about retirement planning, you probably consider the normal expenses that you would naturally incur after your working years are behind you. As you are doing this, you will inevitably get a feel for the legacy that you intend to be able to leave behind to your loved ones.
This is well and good, but you should understand some things about nursing home care and the costs that go along with it when you are looking ahead toward the future.
Misconceptions About Medicare
If you have paid FICA or self-employment taxes for at least 10 years, you will qualify for Medicare when you reach the age of 65 under currently existing laws. You would also be eligible if your spouse has met this requirement. Without question, this program will provide a solid health insurance underpinning, but it does not pay for everything in full.
There are co-payments and deductibles along with monthly premiums, and Medicare will only pay 80% of costs associated with visits to doctors and outpatient treatment. You should certainly account for these potential expenses when you are budgeting for your golden years.
For most people that have been diligent about retirement planning, these expenses are manageable. Unfortunately, there is one gap in the coverage that can demolish your legacy.
Medicare will pay for convalescent care after an injury or illness when recovery is anticipated. However, it will not pay for custodial care. This is the type of care that you would receive in a nursing home.
The average lifespan for someone that is 67 is at least 85 years. When you reach such an advanced age, it is very possible that you will require a level of care that only a nursing home can provide.
The State of Nursing Home Costs
It is certainly not very easy to get out a checkbook and pay for a stay in a nursing home out of your own pocket. Genworth Financial is a company that provides financial products for senior citizens, and they do a nice job keeping track of the ongoing state of long-term care costs.
According to their research, here in the greater Los Angeles area, the median cost for a year in a private room in a nursing home is $109,500. This is an eye catching figure, and if you are married, your family may ultimately face two rounds of nursing home bills.
We have painted a rather hopeless picture to this point, but fortunately, there is a solution in the form of Medi-Cal. This jointly administered federal/state government program will pay for a stay in a nursing home if you can gain eligibility.
Of course, you are probably aware of the fact that Medi-Cal is only available to people that have very limited financial resources. Here in the state of California, the ceiling on countable assets is $2000 during the current calendar year. This number is not very encouraging, but there are some possessions that do not count.
If you own your own home, it is not a countable asset, and there is no equity limit in our state. Household effects, personal belongings, wedding rings, engagement rings, and heirloom jewelry are not counted. One vehicle that is used as a primary source of transportation is allowed, and you can have unlimited term life insurance and up to $1500 worth of whole life insurance.
To address assets that are countable, you could give gifts to your loved ones before you submit your application for Medi-Cal coverage. This takes careful, informed planning, because you have to complete all divestitures at least five years before you apply for Medicaid. If you violate this rule, you are penalized, and your eligibility is delayed.
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