WASHINGTON — U.S. Sen. Pat Toomey, R-Pa., is re-introducing a bill to increase the affordability of long-term care insurance.
Toomey’s Long-Term Care Affordability Act would allow individuals to pay up to $2,500 each year for long-term care insurance with their 401(k), 403(b), and IRAs without a tax penalty.
“The onset of a chronic illness requiring nursing home or in-home care too often has the potential to financially devastate older Americans,” said Toomey. “This legislation allows Americans to use existing retirement accounts to pay for long-term insurance — a commonsense change to enhance financial security in retirement. I hope my colleagues will join me in supporting this measure.”
Retirement accounts give a tax benefit to workers who set aside money now for use during retirement. Early withdrawals from these accounts are generally treated as income and taxed accordingly. However, there are exceptions. For example, 401(k) holders may be able to use their retirement account to own life insurance without a tax penalty. Senator Toomey’s measure would treat insurance for long-term care similarly.
According to the U.S. Census Bureau, 50 percent of individuals living past the age of 65 will need some long-term care, and more than half of American households contribute to retirement accounts. All of them would be eligible to pay for long-term care with retirement savings under this legislation.
