Last week I had a conversation with one of my client’s Melissa W. (Columbia, SC) on the topic of Long-Term Care and the cost of Long-Term care insurance. Yesterday she emailed me this article entitled: The Retirement Crisis Nobody Talks About: Long-Term Care. This is a great article ( http://time.com/money/2901647/the-retirement-crisis-nobody-talks-about-long-term-care/ ) by Penelope Wang on Time.com explaining the biggest risk to your financial security in retirement.
I know and understand this problem all too well, as I personally have aging family members in skilled nursing homes and my mother in-law who currently suffers from Alzheimer’s and is under constant care… not to mention the serious financial burden this has put on the family.
About eleven years ago I started helping clients with financial strategies on the problem of how to protect assets from creditors and nursing home spend-down. Many of the IRS rules have changed (some for the better) over the years and the financial solutions to solve the problem have significantly improved.
Today the topic of Long-Term Care (LTC) planning is an important one for obvious reason… we have 78 million baby boomers retiring at a rate of 10,000 per day and an aging population with longer live expectancies.
The WSJ states that a couple turning age 65 has a 75 percent chance that one of them will need some form of Long-Term Care. At age 85 approximately 50 percent of those people will require some help performing their normal activities of daily living (bathing, continence, dressing, eating, toileting and transferring).
According to a Harvard University study 50 percent of people entering a Long-Term Care skilled nursing facility will become penniless within the first year alone.
Over the last ten years Genworth has examined the cost of Long-Term Care across the U.S. to help Americans plan for these costly expenses. This is the most comprehensive study of its kind; Genworth’s 2013 Cost of Care Survey covers nearly 15,000 long term care providers across the country.
Genworth’s 2013 Financial Cost of Care Survey found that the average cost of nursing home care is $230 per day, that’s $6,996 per month… or $83,950 per year.
Genworth just released their 2014 Financial Cost of Care Survey and the average cost of nursing home care is now $77,380 per year for a semi private room and $87,600 per year for a private room. These figures are the national average.
If we look at a few actual state specific figures for nursing home care cost:
NV = $89,936; CA = $104,025; TX = $65,700; ND = $93,623; NY = $130,670; FL = $91,615; OK = $57,488; HI = $135,050 and in AK its $240,900.
The average nursing home stay is now 3 years.
Over an average stay of 3 years, that simply adds up to a small fortune.
$197,100 if you live in Texas
$312,075 if you live in California
$172,464 if you live in Oklahoma
$722,700 if you live in Alaska
“Sixty-six thousand in savings is less than the cost of one year in a nursing home,” says Tricia Neuman, who’s the senior vice-president at the Henry J. Kaiser Family Foundation and director of its Medicare policy program. “That tells us that many people on Medicare today don’t have the resources they’d need to pay for a significant health or long-term-care expense if it should arise.” So true…and the cost is expected to go up in the coming years.
And according to Genworth’s Financial Cost of Care Survey, by the year 2018 the estimated cost of a private room in a long term care facility is going to be $500 per day or about $200k per year.
These are some pretty serious statistics which don’t paint a pretty picture for either you or me as we get closer to needing some form of Long-Term Care. As you read these statistics you realize that a catastrophic illness can happen to anyone… at any age.
Let me ask you a question: Is it fair to say after we look at these statistics, that the biggest financial RISK that YOU have today… is the risk of Long-Term Care due to a catastrophic illness. Is that a fair statement?
Just this Saturday morning I turned the TV on and Suze Orman is telling everyone on national television that everyone should prepare for long-term care.
There are three questions YOU need to consider.
The first is: You may never need care, but if you did, how will that affect your family? The second is: If care is needed, Where’s The Money Going To Come From… how are YOU going to pay for this?
And the third question is: What Are The Options And The Alternatives, to help YOU cover this potential cost of Long-Term Care?
Interesting that even today, in 2014, as I speak with clients from around the country, I find that many people still think that either Medicare or Medicaid (Medi-Cal in CA) will help pay for their Long-Term Care needs.
