During retirement, most people work closely with their financial planners to make sure their investments are protected from market downturns and keep pace with inflation. It's important their nest eggs last as long as they do -- or longer, so they can pass something on to their heirs.

"But what if your health takes a turn for the worse and you need long-term care?" asks Kathy Laverde, an insurance specialist with Fifth Third Insurance Agency. "That can be a huge financial blow."

Why long-term care insurance?
The American Society on Aging (2003) states that 70 percent of all people age 65 and older will need long-term care at some point in their lives. In the past, long-term care generally referred to nursing home care. Today, long-term care can also include home health care, adult daycare, part-time nursing care and non-medical custodial care.

Long-term care insurance policies vary accordingly. Some policies cover only nursing home costs, while comprehensive policies cover all types of care. "I generally recommend comprehensive policies, because they enable people to remain in their homes as long as possible, which is what most people prefer," Laverde says.

Although many people view long-term care insurance as expensive, it may be money well spent. Long-term care can run $75,000 or more a year, depending on the type of facility and care that's needed*. That may be a huge hit to any retirement fund.

"Many people incorrectly assume that health insurance, Medicare and Medicaid will cover the expenses of long-term care -- but they provide extremely limited coverage," Laverde says.

"It's very sad when people recover from a sustained illness or they leave a surviving spouse, and all the money that had been set aside for living expenses has been depleted by the costs of long-term care," she adds.

To learn more about long-term care insurance, Laverde recommends people talk with their insurance providers or financial planners.

Life insurance and estate taxes
Laverde also encourages people with a net worth of $2 million or more to work with their attorneys and accountants to set up an irrevocable trust for life insurance. This may help families bypass some of the costs associated with estate taxes.

For more information on managing financial risks during retirement, contact Fifth Third at (866) 475-4201 or visit the Fifth Third website.

* Average cost of a private room in a nursing home in the United States is $77,745. Source: MetLife Market Survey of Nursing Home & Assisted Living Costs (October 2007).

Fifth Third does not provide legal or tax advice. Please consult your legal or tax advisor before making any decisions or taking any action based on this information.

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