For many people, the words “long term care” bring to mind images of nursing homes, wheelchairs and the incapacitated elderly. But really, long-term care is a wide range of services and other support you may need to get through basic everyday tasks and life as you get older. This service will be one of your biggest expenses in retirement, yet many who are nearing retirement don’t understand the risks and the financial strain it can be to their financial plan and retirement.
How long term care affects women
Statistically, women live longer and many are caregivers to their own family and spouses. Those extra years can be a strain financially, and there may be no finances left and no one left to take care of them when they need it themselves. Approximately 70 percent of all Americans age 65 and older will need long-term care at some point in their lives 1. These costs can be staggering . . . in fact, it’s estimated that one year of home health care (which costs $45,000/yr today) will cost over $72,000/yr by the year 2034. The cost of full Nursing Home Care could easily be double that. Overall, the out of pocket costs for the average 65-year-old couple will be $225,000 over 20 years of retirement 2. These are astounding numbers, and rarely are we counseled and informed on how to plan & prepare for this eventuality.
Costs to women
When women are the care givers, it can take a physical & financial toll to manage the responsibilities. The lost wages and benefits for women who leave their work prematurely to care for their loved ones results in an average loss of $324,000 for those caregivers 4. There is also a greater incidence of depression and heart disease among women caregivers 5.
Not only are women more likely to be caregivers, but they are more likely to need care themselves as surviving spouses. Women are twice as likely to file LTC claims and are the majority of nursing home and assisted living patients 3. For most women the care for chronic health conditions is initially provided at home. Most people want to stay at home as long as possible, and with medical advances, mobile care can do that . . . but at a price.
What are the options to pay for this?
There are many misconceptions on how LTC expenses will be covered. The first step in creating a plan is to know what your funding options really are:
Health Insurance and Social Security – DO NOT cover long-term care expenses
Medicare – Only up to 100 days are covered, requires a 3-consecutive-day hospital stay.
Medicaid – Covers only for very poor people with assets of $2000 or less (varies by state)
Out of pocket – Using income and savings or selling assets, but if the median private room is $87,600/yr, it may be hard to afford
Long-Term Care Coverage – This is where you really need a professional planner and need to be educated in the options, as there are some very poor & expensive products being sold in the marketplace.
It is obvious that the first three options are not an option, and most people do not have the additional money to pay themselves or “self-insure.” Straight Long-Term Care policies pay a certain amount monthly for qualified long-term care claims. Those policies are paid for normally in an annual or monthly premium . . . for life. If you never have a claim, then all those premiums are gone, and the insurance company keeps them. A viable Hybrid Life Insurance and Long-Term Care Rider product is what I recommend to many of my clients. You pay a premium annually or monthly for Life Insurance Death Benefit, and I contractually arrange that to be “paid up” (no more premiums due) in 20 years. Then you have a Permanent Death Benefit that will pay your family, but if you need Long-Term Care, it will pay the same monthly benefit to cover those costs and deduct that from the death benefit when you pass. This is just one of the valid options to cover this need. Again, I recommend you work with an experienced planner who understands and can represent any product or carrier.
Health care is a big-ticket expense for most retirees, especially with rising costs and the likelihood of needing long-term care. If you are not prepared for these expenses, they can put huge pressure on the rest of your finances. Please get professional counsel on the ways to plan for this eventuality, and be educated and prepared so you have choices later.
Please email or call me for a free brochure on “Understanding Health Care Costs in Retirement.”
Jeffery Masters, President of Jeffery W. Masters & Associates 954-977-5150. Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Independent Financial Partners, a registered investment advisor. Independent Financial Partners and Jeffery W. Masters & Associates are separate entities’ from LPL Financial
1.Medicare & You 2015, US Dept of Human Services
2.Cost of Care Survey 2014, Genworth Financial
3.American Assoc of LTC Ins 2013