Firefighting is scary; rushing into burning buildings, tackling hazardous materials, and providing emergency medical care, all while putting your own life on the line–it’s a thankless task, but it’s the one you seek. Perhaps you enjoy the rush, or the satisfaction you get from saving others makes it all worthwhile. However, there’s something maybe even more frightening than that three-alarm fire – the prospect of needing long-term care.
According to a report by the U.S. Department of Health and Human Services, 70% of adults who survive to age 65 will develop severe Long-Term Services and Support (LTSS) needs before they die. Furthermore, 48% of adults receive some kind of paid care over their lifetime, encompassing various types of support such as home care, assisted living, and nursing home care.¹
Unfortunately, as a firefighter, you’re at even greater risk of falling ill with cancer and other non-cancer illnesses and at increased risk of developing musculoskeletal problems such as lumbar disc herniation and lower back pain² that can lead to reliance on assistance from others to accomplish daily tasks.
Source: https://www.firefightercancersupport.org/
How Much Does Long-Term Care Cost?
You may be thinking to yourself, well, Medicare will cover that. Unfortunately, that’s not the case. Medicare typically doesn’t cover the costs associated with long-term care, and it isn’t cheap. A six-month stint in a nursing home facility in a semi-private room will set you back about $50,000, while a year of adult day health care could cost around another $25,000. These prices will drastically vary by state, mind you; plus, by the time you retire, costs are likely to have significantly increased.
Source: https://www.genworth.com/aging-and-you/finances/cost-of-care
Considering you have increased chances of requiring long-term care, it’s imperative that you determine how to pay for these long-term costs well before you head into retirement so that you don’t have to put your savings at risk once you are older. You have two options to consider: investing your resources to help pay for long-term care costs or, alternatively, purchasing long-term care insurance.
What is Long-Term Care Insurance?
Long-term care insurance is designed to cover the costs of services that aren’t typically covered by health insurance, Medicare, or Medicaid. This includes assistance with activities of daily living (ADLs) like bathing, dressing, and eating, as well as specialized care for chronic illnesses.
Long-term care (LTC) insurance policies typically involve paying premiums over time in exchange for coverage during periods of extended healthcare needs. One key aspect to understand is the elimination period—a waiting timeframe that ranges from around one month to six months after an insured event occurs before benefits become payable. During this period, policyholders pay out of pocket for any long-term care expenses. After the elimination period ends, the insurance company will reimburse eligible costs up to a daily benefit amount and within a maximum lifetime limit specified in the policy.
For example, let’s say you have a long-term care insurance policy with a 90-day elimination period and a daily reimbursement limit of $200, with a lifetime maximum benefit of $250,000. If you need home health care that costs $220 per day, you would first need to pay out-of-pocket for the first 90 days. After that elimination period, your insurance would start reimbursing you up to $200 per day for your care costs. However, since your care costs $220 per day, you would still need to cover the additional $20 per day yourself. The insurance will continue to cover $200 per day until you reach the $250,000 lifetime maximum benefit. After reaching this limit, you would be responsible for all further care costs. Keep in mind that this is just an example, and your situation will be different according to your policy, age, and health status. If you qualify, Medicaid may also help with certain long-term care costs as well.
So, even if you do purchase long-term care insurance, you’ll want to have funds on hand to pay for your daily expenses when and if it becomes necessary.
Why Firefighters Might Consider LTC Insurance
Given the high-risk nature of firefighting and the associated health challenges, LTC insurance can offer peace of mind, both now and in the future.
For one, LTC insurance provides a safety net, helping ensure that you have coverage for essential care services without having to dip into your retirement savings. This can significantly reduce the stress on you and your family during difficult times and reduces the chances of having to ask friends or family to either help pay for your expenses or help take care of you.
Additionally, premiums paid on LTC insurance may be tax-deductible, depending on your age and policy, which can help reduce your overall tax burden and help you save up for those out-of-pocket expenses you may face later on.
Long-Term Care Insurance Tax Deduction Limits
| Attained Age Before Close of Taxable Year | 2024 Limit |
|---|---|
| Attained Age Before Close of Taxable Year: 40 or less | 2024 Limit:$470 |
| Attained Age Before Close of Taxable Year: More than 40 but not more than 50 | 2024 Limit:$880 |
| Attained Age Before Close of Taxable Year: More than 50 but not more than 60 | 2024 Limit:$1,760 |
| Attained Age Before Close of Taxable Year: More than 60 but not more than 70 | 2024 Limit:$4,710 |
| Attained Age Before Close of Taxable Year: More than 70 | 2024 Limit:$5,880 |
The Case for Investing Instead of LTC Insurance
While LTC insurance offers specific benefits, it’s not the only option. Investing in a well-diversified portfolio might provide greater flexibility and growth potential, especially if you start planning early.
If you’re early in your career, investing might make more sense than purchasing LTC insurance. Time is your greatest ally when it comes to investing, allowing your money to grow through the power of compounding. A health savings account (HSA) can be a tremendous tax-efficient vehicle for these investments.
Unlike LTC insurance, which restricts the use of funds to specific care-related expenses, investing allows you to use your money however you see fit. If you don’t end up needing LTC, your funds can be used for alternative expenses, an improved lifestyle, or as an inheritance, for example.
While LTC insurance provides guaranteed coverage, investing your funds might yield higher returns, especially over a long time horizon. If you invest wisely, you might end up with a larger nest egg that can cover not only your long-term care needs but also other retirement goals. On the other hand, you may end up with less than what you started with – that’s the risk of investing, after all.
In Conclusion
Deciding between LTC insurance and investing is not a one-size-fits-all solution. LTC insurance can provide peace of mind and financial stability, particularly if you are concerned about health issues in retirement, and as a firefighter, you likely are. On the other hand, investing offers more flexibility and potential for growth, which could better serve those who start planning early.
In the end, the best approach may be a combination of both strategies tailored to your personal health, financial situation, and retirement goals. However, whether you choose to purchase LTC insurance, invest, or do a bit of both, the most important thing is to start planning now! Your future self—and your family—will thank you.
If you’re unsure which path to take, we can help! At Protection Red, we specialize in guiding firefighters like you through accounting for rising healthcare costs in your financial plan without needlessly putting your retirement savings at risk. Just click the button below to get started!
Sources:
1: https://aspe.hhs.gov/reports/what-lifetime-risk-needing-receiving-long-term-services-supports-0
