Most older adults want to stay in their homes as they age, but many are increasingly realizing they need to plan for care they may need later in life.
Paying for in-home care to cope with an unexpected injury or chronic illness can deplete a lifetime of savings as the average cost of home health aides now exceeds $77,000 annually, according to Genworth and CareScout.
One option that offers both peace of mind and potential financial advantages is pre-paying for long-term care coverage.
This approach secures care for tomorrow while offering significant potential tax benefits today that make the investment even more worthwhile.
Here’s how it works and how to make the most of these benefits.
What Does It Mean To Pre-Pay for Care Coverage?
Pre-paying for care coverage and purchasing long-term care insurance can both help you plan for future care needs, but they work very differently.
Long-term care insurance is a conventional insurance policy.
You pay monthly or annual premiums, and if you need care in the future, the policy pays out benefits up to the limits of your coverage’s declarations. However, these policies frequently have elimination periods, or a time between when you file a claim and when coverage kicks in. For most policyholders, the average elimination period is 90 days, meaning you will pay out-of-pocket for care during that time.
Premiums can also increase over time, making it harder to predict long-term costs.
Pre-paying for long-term care coverage with a plan like Kendal at Home is more like making an upfront investment or deposit with a long-term care program. Although you’ll still pay monthly fees, these may be lower if you pay a higher upfront fee that locks in your future care at now rates. The fees also include a care coordinator who meets with you regularly to assess your health needs and identify when you would benefit from additional services, such as assistance with grocery shopping or updates to your home if you are experiencing mobility challenges.
Depending on the type of program, you may also be less likely to be denied benefits.
Some programs may also offer tax advantages because part of payments above the Statutory Threshold for Deduction is treated as a medical expense.
How Does Kendal At Home’s Model Work?
As a continuing care at home provider, Kendal at Home falls under this category.
Members pay an initial fee and monthly maintenance fees that vary depending on age and level of desired future care benefits. They can choose to pay a higher upfront fee if they prefer to pay lower monthly fees, or pay less upfront and spread out those costs over time.
In exchange, they gain immediate access to care coverage that lasts a lifetime and follows them wherever they go. They are appointed a care coordinator who works with them to develop a care plan (often long before they need it) and makes adjustments as their needs change.
If they do need care, they are eligible for in-home services that may include skilled nursing, light housekeeping services or support to medically necessary appointments.
Care coordinators often provide support in other ways as well, such as assisting with discharge planning after a hospital stay, recommending safety updates to their home, and serving as a point of contact for family members when needed, providing peace of mind for everyone.
The Key Tax Benefit – Medical Expense Deduction
IRS Code §213(a) states that medical expenses, including expenses for long-term care services or premiums for long-term care insurance, are deductible in the year they are paid.
Taxpayers may deduct expenses that exceed 7.5% of their adjusted gross income (AGI) as itemized deductions.
Kendal at Home may be tax-deductible if your total medical costs for the year are high enough.
Filing these expenses as deductions will lower your taxable income in the year of payment. We always recommend you consult with a qualified tax advisor or attorney on your specific financial situation.
Other Financial Advantages of Pre-Paying
By pre-paying for long-term care, you lock in today’s rates for services you may need in the future, protecting yourself from rising costs over time.
This brings predictability and peace of mind, knowing that your care is secured regardless of how prices change. It also simplifies planning for both you and your family, reducing stress and uncertainty while making it clear exactly what support will be available when the time comes.
Is Pre-Paying for Long-Term Care Right for You?
As with every care decision, there are many factors to consider if you're thinking about pre-paying for long-term care, such as your current tax bracket, financial goals, and health outlook. Every person's financial situation is unique, so be sure to consult with your financial advisor or another qualified tax professional to determine the right solution for your needs.
Kendal at Home Gives Seniors Peace of Mind
With the peace of mind knowing you'll have access to care exactly when you need it, and the potential up-front tax benefits, pre-paying for long-term care is the solution that makes sense for most seniors today and tomorrow.
Kendal at Home has been the trusted alternative to senior living communities for more than 20 years, with membership fees and monthly fees that are often tax deductible.
This gives older adults access to the benefits of pre-paying, giving them greater financial predictability and peace of mind knowing they'll have access to care as soon as they need it.
If you're curious to learn more about whether Kendal at Home is the right fit for your retirement plan, sign up for a virtual seminar to learn more about costs and benefits.
