Senior Care – A Basic Guide For A Complex Issue
by Brian McGeough, CFP® and Senior Relationship Manager
Photo credit: Shutterstock
As we plan for retirement, we often focus on the basics; saving enough money to maintain our lifestyle, managing taxes and ensuring that we don’t outlive our money. But one critical component to financial planning that is often overlooked is the possibility of needing long-term care.
Statistics show that 70% of people 65 and older will need long-term care. There are several types of long-term care one might need as they get older: home healthcare aide, assisted living and skilled nursing facilities.
What Are The Differences Between Long Term Care Options?
Home healthcare - Aides can help with basic personal needs such as cooking, cleaning, getting out of bed, bathing and dressing. Generally, this is hourly pay for a certain number of hours per week. The national average cost is $27 per hour but can range from $21 - $40 per hour depending on the state.
Assisted living – A type of residence for older adults that provide prepared meals, housekeeping, medication management, and personalized help with activities of daily living (ADLs) such as bathing, dressing, using the bathroom, eating, getting in or out of bed or a chair
Nursing home – A facility that provides 24-hour care and supervision for people that need long-term medical or rehabilitation care but not to the point where they have to stay in a hospital.
Comparison of Services Provided in Senior Living Facilities
Source: National Council on Aging
What Is The Average Stay At Assisted Living Facilities?
Statistics show that the average length of stay in an assisted living facility is 3.2 years. 20% of residents stay 5 years or more.
What Are The Costs for Assisted Living Facilities?
Senior care can be very expensive and there are many variables that impact the cost, including how long the stay is and what type of services are needed. The average monthly cost for assisted living facilities in the country is $5,551 per month ($66,612 per year). Below are some select states and the associated costs:
New Jersey: $7,622 per month
Hawaii: $9,620 per month (highest in the country)
Mississippi - $3,915 per month (lowest in the country)
Who Pays?
Medicare – Only pays for long-term care if you require skilled services or rehabilitative care. The maximum number of days paid for is 100.
Medicaid – May pay a large portion of long-term care, but there are strict income and asset limits to be eligible for Medicaid.
Long-term care insurance policies - Pay a defined monthly amount. The premiums could be quite expensive, and this is a use it or lose it policy. It’s possible to pay the premiums every year and never make a claim.
Hybrid or “linked” policies – These policies are a combination of long-term care with a death benefit. Hybrid policies cost more than long-term care policies, but you will be able to tap the death benefit early if you need the cash to pay for an assisted living stay.The amount of the withdrawal will reduce the death benefit. If you don’t ever need long-term care, the beneficiaries will receive the full death benefit.
Self-pay – Someone with significant financial means can set up their own investment fund dedicated to paying their long-term care costs.
Options for senior care and how to pay for it are many and complicated. This is just the tip of the iceberg. It is important to start to think about long-term care sooner rather than later. Insurance premiums typically go up if you start a policy later in life. As we age, it is important to maintain as good a quality of life as possible while not placing an undue burden on our families.