Long-Term Care Planning: Essential to Retirement Plan

By Deborah Jeanne Sergeant


You have likely worked with a financial adviser for reserving and investing money for retirement; however, if you have not considered your long-term care options, your plan still misses a very important piece.

“Unfortunately, not enough people think about this,” said Miles P. Zatkowsky, partner and founder of Dutcher & Zatkowsky, a law firm in Rochester. “When considering retirement, you have to ask yourself, ‘What if I get sick?’ You figure out a budget that is fine if you maintain the status quo, but what if you get sick?”

A debilitating accident, stroke or other reason for long-term care can wipe out the assets of someone who has worked hard all his life in a matter of months. The cost of skilled nursing in an institutional setting is $500 per day or more in the Rochester area, and the average stay length is 835 days, according to the National Care Planning Council, amounting to nearly $400,000.

What will the cost be by the time you need it? About half of adults living now will need long-term care.

Zatkowsky said that some people consider long-term care insurance policies; however, unless they have purchased them early enough, their current health problems could prohibit them.

There’s also the cost. Zatkowsky said that long-term care insurance premiums for those who already have one have increased as much as 8,090% in 10 years. They used to cost $3,000 or so per year; now, they’re no longer so affordable. Those not grandfathered in could pay as much as $10,000 annually.

“They’re supposed to be a fixed premium but insurance companies can apply for increases,” he said. “I’ve had three increases over the past decade.”

He added that many companies no longer sell long-term care insurance because the costs of care rose faster than anticipated, although companies honor the policies they have already sold.

Medicare typically covers the first 20 days for live-in rehabilitation. From day 21 to 100, it covers 80% of the cost.

“Otherwise, Medicare does not cover skilled nursing,” Zatkowsky said. “That’s where you start talking about Medicaid.”

The income threshold is $875 for singles, $1,284 for married couples (both applying) and $875 for only one spouse applying. The asset threshold is $15,750 for singles or one spouse applying and $128,640 for the non-applicant spouse.

Simply giving away the excess money doesn’t work unless it’s five years prior to the need for Medicaid, with a few exceptions.

One way to qualify for Medicaid is to join a community pooled supplemental needs trust if you reside in the community and not in a nursing home.

“If you do that, you can give all that excess each month and have that trust pay some of your expenses as long as that is going toward keeping you in the community at home,” Zatkowsky said.

He added that the pooled trust might pay things like taxes, rent or mortgage, and utility bills — bills necessary to keep you living independently. If the person lives in a nursing home, all the available income goes towards the monthly cost of care, except for $50 per month.


The principal of an investment retirement accounts are also exempt; however, the payout is considered income and will go towards nursing home care costs.

“A couple could have a $1 million IRA in withdrawal status and $50,000 to $60,000 is coming out a year and the nursing home cost is $150,000 a year. The income from the withdrawal is money that would need to go to the nursing home and any cost above that would be paid by Medicaid,” said Jeff Feldman, certified financial planner with Rochester Financial Services in Pittsford.

If one spouse of a qualifying couple goes into a nursing home and the other remains in their residence, the latter can keep a share of their income while part of their income and Medicaid pays the remainder.

Feldman said that for people with a net worth of $600,000 or less, they likely cannot afford long-term care insurance. But for those with $2 million or more, they can probably self-insure.

“It’s a very rough rule of thumb,” he added. “It depends upon your health and what your life expectancy might be. The worse health you’re in, the more expensive long-term care insurance will be.”


Christine Palmiere, first vice president and financial adviser with Sage Rutty & Co., Inc. in Rochester, is leery of spending down to qualify for Medicaid.

“What if you need those assets?” she said. “You give them away and even if you last the five years, you won’t have money. How will you adapt your lifestyle to poverty because you’re afraid of having a care need? If you live a long life, you might need those assets. Even if you have kids who will pay for your lifestyle because it was your money, what happens if that son or daughter has a lawsuit or car accident and they lose their money? Or if they have a horrible divorce. That’s not a great idea.”

She suggested speaking with an attorney to set up an irrevocable trust to protect assets, although the trust is also subject to the five-year look back.  The money in the trust can still be withdrawn for expenses; however, only as outlined in the rules of the trust, which cannot be changed. It’s important to pay attention to the rules of the trust before committing to it.

“The best line of defense is to consult professionals,” Palmiere said.