Meeting Long-Term Care Needs With Longevity Annuities
The number of older Americans age 65 and older living in the United States by the year 2020 is projected to be 54 million. This is an increase of 54 percent from year 2000’s population of 35 million. It is no secret that the growth in older persons, members of the “Baby Boomer” generation (born 1946-1964), will place a greater demand on health care services than any other generation before and probably afterwards. This includes the need for care provided in the home or a facility of choice in order to continue to live a life of dignity and respect.
As older Americans become a larger part of the population (1/5th of the population or 20 percent by 2050) we all will have someone whom we love that is either in need of care or we ourselves will be the recipient of that assistance. The way in which we meet those needs is with long-term care, a type of care that many of us are, or should be familiar with.
What Constitutes a Need for Long-Term Care?
The need for long-term care arises when a person is no longer able to perform certain basic activities of daily living without some level of assistance. These are referred to as ADLs, which include bathing, continence, dressing, eating, toileting, and transferring. An inability to perform any 2 of these 6 basic ADLs is a strong indicator of admission into a long-term care facility or a need for someone in the home to provide assistance.
In addition to a person’s inability to perform basic activities of living, if a person suffers from some form of cognitive impairment such as Alzheimer’s Disease or dementia, that person would also be deemed in need of long-term care. What you may notice in these descriptions is the fact that a person requiring long-term care services suffers from conditions that are chronic or long-term in nature, as oppose to an acute condition (like a broken arm) that a person is expected to recover from.
How Are Long-Term Care Needs Funded?
A study of costs for long-term care services shows that on average (nationally) individuals will pay $258 a day ($94,000 annually) in 2013 for a private nursing home room, $83,000 annually for a semi-private nursing home room, and up to $29,640 a year for a home health aide.
Long-term care needs can be met financially in a variety of ways. A person can purchase a long-term care insurance policy that will cover some or all of the costs associated with care provided in the home or a facility. A person may also consider using personal assets or taking out a reverse mortgage on their home.
What is a Longevity Annuity?
Longevity annuities are a type of deferred income annuity (DIA) product that is a twist on the old deferred annuity fable. With a DIA, the annuity owner has the ability to receive a stream of income at a future date, say at age 85, usually when a need to pay for long-term care services arises, and choose a return of premium or principal option to conserve the principal amount used to fund the annuity for the individual’s estate (once death has occurred). Such products have begun to catch on as the population ages and mortality rates increase. According to LIMRA International, the sales of DIAs in 2012 were more than $1 billion with sales in the fourth quarter of that year more than 150 percent higher than those sales in the first quarter.
Longevity annuities are gaining in interest and may be worth a look to see if they are the appropriate solution for you or a loved one’s long-term care needs.
To learn more from this annuity professional, simply click here (Todd Heckman).
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