Long-term care is a critical factor for people who are planning for retirement. It’s essential to understand what long-term care is, its cost, and the options available to you to make an informed decision about how best to prepare for potential long-term care needs. Let’s break down why long-term care planning is so important.
What is Long-Term Care?
Long-term care generally refers to services that help individuals with activities of daily living (ADLs) when they can no longer manage independently due to chronic illness, disability, or other conditions. These services may include personal care (such as bathing and dressing), medical assistance (like administering medication), custodial care (help with meal preparation, housekeeping, and laundry), as well as supervision and companionship.
The Cost of Long-Term Care
According to Genworth Financial’s 2021 Cost of Care Survey, the national median annual cost for home health aide services is $61,776 ($5,148 per month). Nursing home costs vary from state to state; however, the national median cost for a semi-private room is $94,900 per year ($7,908 per month). Unfortunately, Medicare does not cover long-term care costs; Medicaid may pay some of these expenses if you meet specific criteria. Most private insurance policies do not cover long-term care either. That means those who need this ongoing care must pay out of pocket or find alternative ways to fund their care needs.
Understanding the Odds of Requiring Care
Statistics show a high likelihood that many people will require long-term care during their lifetime—particularly women—which means it’s essential to plan ahead. According to recent data from the U.S. Department of Health & Human Services Administration on Aging (AoA), about 70% of people over age 65 will need some form of long-term services and support during their lifetimes. For women in particular, this number increases significantly; according to AoA research, 80% will require at least some form of paid assistance in their lifetime.
Exploring Options for Coverage
Fortunately, there are several options available when it comes to covering your potential future costs associated with long-term care, including traditional policies like those offered by insurers or hybrid policies with death benefit components such as life insurance policies with a rider providing coverage if you ever needed it later in life; these types of policies offer both peace of mind and financial flexibility should you ever need them later in life. Additionally, annuities can be used to provide long-term care benefits and may have less health underwriting. No matter which option best fits your situation, it’s essential that you speak with your financial advisor before making any decisions so they can help guide you through the process effectively.
Long-term care costs can be astronomical depending on where you live or what level/type of service(s) you require depending on your situation. Everyone should be prepared if they need this type of assistance later in life. Regardless of whichever option works best for you, one should always speak with their financial advisor before making any decisions.
Many people have learned about the power of using the Safe Money approach to reduce volatility. Our Safe Money Guide is in its 20th edition and is available for free.
It is an Instant Download. Here is a link to download our guide: