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In this video, Jamison Smith, wealth advisor at EWA, discusses the importance of having a solid long-term care plan in retirement. He highlights the significant costs associated with long-term care and the potential impact on one’s net worth, especially for those who aren’t high-net-worth individuals. Jamison emphasizes the need for long-term care planning for tax efficiencies and suggests considering options like long-term care insurance or life insurance policies with long-term care provisions to help cover these costs and avoid higher tax brackets in retirement. Individual circumstances should guide the choice of a suitable long-term care strategy.
Hi, I’m Jamison Smith, a wealth advisor with EWA, and this is another video continuing our series on 10 tips for retirees or anybody that is entering retirement. This tip is to have a sound game plan for long -term care planning. So long -term care need, women’s stay on average three and a half years in a long -term care facility and men’s stay on average two years.
And in the state of Pennsylvania, which is where we’re located, the average long -term care cost is about $8,000 a month, so almost $100 ,000 a year. If you have not planned properly, this can drastically eat away at your net worth and assets once you’re in retirement, especially if you are not a super high net worth individual that is self -insured.
Many of our clients that we work with, they end up becoming self -insured, but there is still sufficient long -term care planning that needs to be put in place, and one of the main reasons is for tax efficiencies. If you have accumulated a high net worth where you’re able to be self -insured, you’re most likely going to be in the highest tax bracket, especially in the distribution phase.
And so if you have to pull an additional $100 ,000 or $200 ,000 a year out of your portfolio to pay for a long -term care cost, all of that’s going to be taxed at the highest tax bracket on top of all of your other income. So having some sort of long -term care policy or life insurance policy with a long -term care option on it will allow you to draw on that tax -free and avoid getting clipped at the highest tax bracket on any distributions for retirement.
So there’s a number of different ways and situations that you would want to fund long -term care. This is all situational, depending based on net worth, goals, and a number of other factors. So if you have any questions on your situation, feel free to reach out.
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