Fed policy effect No. 4: Costly long-term care premiums
Long-term care insurance covers the cost of a wide range of expensive services you may need in your final years, including nursing home care, assisted living facilities and adult day care. This insurance potentially can save you and your family hundreds of thousands of dollars.
But thanks to falling interest rates, long-term care insurance premiums have skyrocketed, says Jesse Slome, executive director of the American Association for Long-Term Care Insurance.
"Lower rates have wreaked havoc on long-term care insurance costs," Slome says. "Rates today are about 50 percent higher than they were five years ago."
As interest rates have fallen, insurers have seen the return on their investments slip. For every 1 percent decline in rates, insurers need to hike premiums by between 10 percent and 15 percent, according to Slome.
Consumers may be tempted to delay buying long-term care insurance while they wait for interest rates to rise. But that strategy carries risks, Slome says.
"Twenty-four hours from now, your health can change," Slome says. "Or, you go to the doctor and some condition is diagnosed. Now, you are uninsurable."
Instead of delaying a purchase, Slome encourages people to talk to a long-term care insurance specialist who can offer options for making care more affordable.