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What are some ways to fund a long-term care plan?

Many people in New Jersey have a loved one with dementia or Alzheimer's disease. What makes the situation even sadder is that a person could live with dementia or Alzheimer's for years or even decades, depending on the onset date of the disease.

This means that a person's caregiver (often their spouse) must bear the costs of caring for their loved one's daily needs, which can be significant. Therefore, couples in New Jersey may want to think about long-term care planning when they're younger, before they are affected by such illnesses.

One way some choose to pay for long-term care is through long-term care insurance. People can start paying premiums on such a policy while they are still relatively young and healthy. The insurance plan will contain information on what qualifications a policyholder will need to meet in order to receive benefits under the plan.

Another way to pay for long-term care is through a fixed index annuity that also contains additional benefits if a person gets sick. It is important to understand the terms of the annuity. For example, some annuities pay twice the income stream the person would normally receive, while others will only pay one-quarter more than the income stream the person would normally receive. Like long-term care insurance, the annuity may contain provisions regarding the type of help a person needs before that person can receive benefits. Certain retirement plans may be rolled over in order to fund the annuity.

Then, there is life insurance with living benefits. These benefits may kick in when a person becomes critically ill. If a person never uses the living benefits, the benefits will then flow to the person's named beneficiaries upon the person's death. Of course, every policy is different, so it's important to understand one's options. Finally, there are dividend-paying securities, which is a type of investment.

Caring for someone with dementia or Alzheimer's -- even if it is at-home care -- can cost a significant amount of money, on top of all expenses a person already pays for in their day-to-day life. Therefore, it is good to have a long-term care plan in place sooner rather than later.

Source: Kiplinger, "Can You Afford $72,000 a Year for Long-Term Care?," Mark Pruitt, Oct. 2017

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