Addressing the potential threat of long-term care expenses may be one of the biggest financial challenges for individuals who are developing a retirement strategy.
The U.S. Department of Health and Human Services estimates that 70% of people over age 65 can expect to need long-term care services at some point in their lives.¹ So understanding the various types of long-term care services – and what those services cost – is critical as you consider your retirement approach.
What is Long-Term Care?
Long-term care is not a single activity. It refers to a variety of medical and non-medical services needed by those who have a chronic illness or disability – most commonly associated with aging.
Long-term care can include everything from assistance with activities of daily living – help dressing, bathing, using the bathroom, or even driving to the store – to more intensive therapeutic and medical care requiring the services of skilled medical personnel.
Tip: Won’t Medicare Pay for It? After a three–day hospital stay, Medicare will cover the first 20 days in a skilled nursing care facility completely. For the next 80 days, it will cover all but $157.50 per day. And after 100 days, it won’t cover anything. Source: Centers for Medicare and Medicaid Services, 2015
Long-term care may be provided at home, at a community center, in an assisted living facility, or in a skilled nursing home. And long-term care is not exclusively for the elderly; it is possible to need long-term care at any age.
How Much Does Long-Term Care Cost?
Long-term care costs vary state-by-state, and region-by-region. The national average for care in a skilled care facility (single occupancy in a nursing home) is $91,250 a year. The national average for care in an assisted living center (single occupancy) is $43,200 a year. Home health aides cost a median $20 per hour, but that rate may increase when a licensed nurse is required.²
What are payment options?
Often, long-term care us provided by family and friends. Providing care can be a burden, however, and that need for assistance tends to increase with age.
Fast Fact: Getting Care Now. Some 1.4 million adults live in skilled nursing facilities. Another 4.8 million remain in their own homes but get help with personal care from other people. Sources: CDC, 2015. (Data from 2013 report is the latest available.)
Individuals who would rather not burden their family and friends have two main options for covering the cost of long-term care: they can choose to self-insure or they can purchase long-term care insurance.
Many self-insure by default – simply because they haven’t made other arrangements. Those who self-insure may depend on personal savings and investments to fund any long-term care needs. The other approach is to consider purchasing long-term care insurance, which can cover all levels of care, from skilled care to custodial care to in-home assistance.
When it comes to addressing your long-term care needs, many look to select a strategy that may help them protect assets, preserve dignity, and maintain independence. If those concept are important to you, consider your approach for long-term care.
¹ U.S. Department of Health and Human Services, 2015
² Genworth 2015 Cost of Care Survey
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