Long Term Care Concerns
Millions of Americans are financially unprepared for retirement. In fact, the typical adult in our country has only saved about $2,500 toward retirement, with couples saving roughly double that amount. These savings will not go far in maintaining the retirement lifestyle of anyone. After all, in retirement, your “earned” income from full-time work will stop.
The Trap of Procrastination
Young people can find it difficult to sacrifice now for something that is 30 or 40 years away. It is easy to put off today, what you can do tomorrow. Instant gratification is more fun than delayed gratification. However, it does not take long before that tomorrow becomes today. Without proper planning for retirement, when that day arrives, the once young worker realizes that he or she has no savings.
What if our hypothetical worker believes he or she will never retire but will continue to work for the rest of his or her life?
Unfortunately, most older Americans must stop working. It is not necessarily by choice. Some may lack relevant job skills for the current job market or may leave employment due to changes in health. A potential employer might choose a less expensive younger worker over a more expensive older worker. For these and other reasons, the need for financial planning looms ever greater. This is especially true, when you consider the high cost of long-term care.
The Cost of Long-Term Care
People today are living longer than when today’s seniors were young adults. Living in a nursing home currently costs roughly $100,000 a year. This is the national average. At this rate, long-term care will cost $1 million per decade. If a person enters a nursing home at age 70 and lives to age 90, the long-term care costs could reach $2 million. Living in an assisted living facility is about half that cost, but is still a lot of money. According to commonly cited government statistics, once you reach age 65, you have a 70% likelihood of needing some form of long-term care. What are the most common options for paying for this care?
How People Pay for Long-Term Care
If you have very low income and few countable assets, Medicaid may pay for long-term care, after you have “spent down” your assets to allowable eligibility limits. Medicaid is the largest single-payer of nursing home care in the United States. Medicaid eligibility requires that you have limited financial resources to be eligible. An elder law attorney should be consulted without delay to discuss how to lawfully maximize preservation of your assets from the spend down and meet eligibility requirements as they vary from state to state.
Too many people also mistakenly assume that Medicare will pay for the cost of a nursing home. In reality, Medicare only provides very limited benefits and only for certain types of care in a skilled nursing facility and only for a limited number of days. For example, Medicare may fully pay for a covered patient to receive impatient rehabilitation services at a skilled nursing facility after hip replacement surgery for 20 days. Then, for days 21 through 100, Medicare will pay only part of the costs. What if that patient cannot return home, but must be discharged to a facility for assistance with one or more of the “activities of daily living” (i.e., eating, bathing, getting dressed, toileting, transferring, and continence)? In that case, Medicare will not pay for such assistance, since they are not medically necessary.
Some people may be able to self-insure. However, depending on the duration and cost of their long-term care, they may be rendered Medicaid eligible with no inheritance for loved ones. People in this category might be better off using some of their money to buy long-term care insurance from a reliable company.
Long-Term Care Insurance
Many financial experts recommend that people buy long-term care insurance. However, this option has some downsides. This type of insurance can be expensive, especially if you wait too long to purchase a policy. Wait too long and you may not qualify health-wise. There are now far fewer companies that offer long-term care insurance than there were 20 years ago. Fortunately, these remaining companies have survived market downturns, unexpected increases in claims made and heightened scrutiny by state insurance commissioners.
If you want to buy long-term care insurance to preserve your financial freedom and protect the inheritance you intend to leave, then find a reputable company you trust. The next issue is to determine the amount of coverage to purchase. When calculating the appropriate amount for your unique circumstances, consider the amount of other resources likely available to help pay for long-term care costs. These resources include Social Security retirement benefits, your investments and any pension you may receive. These anticipated income streams can help pay some of the monthly long-term care costs and reduce the amount of coverage you need.
One less known program is Veteran’s Pension. This monthly benefit is available to war-time veterans who meet financial requirements and need regular assistance with activities of daily living. This program, sometimes called “Aid & Attendance”, pays a monthly pension to the veteran, or their surviving spouse which helps to offset the cost of care.
Summary
Long-term care planning is an essential component of a secure retirement. The issues involved, by their very legal and financial nature, require the expert advice of a financial advisor, a long-term care insurance agent and an elder law attorney. This team of professionals can help you find retirement planning peace of mind, so do not put off until tomorrow, what you can do today.
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