Men will need assistance for an average of 2.2 years, and women will need help for 3.7 years, says the U.S. Department of Health and Human Services’ Administration of Aging. Many people are hoping that they can count on receiving care from spouses or children, that is, unpaid care, says The Detroit News in an informative article, “What to know about aging and long-term care costs.” Unfortunately, that’s not always how things work out.
Here’s what often happens:
- More than a third of seniors will need to stay in a nursing home, where the median annual cost of a private room has skyrocketed to more than $100,000.
- Four out of 10 people will opt for paid care at home. The median annual cost of a home health aide is more than $50,000.
- More than 50% of all seniors will incur some kind of long-term care costs, and 15% of those will incur more than $250,000 in costs, according to a study by Vanguard Research and Mercer Health and Benefits.
Medicare doesn’t pay for long-term care. Medicare does not cover what it terms “custodial” care. For most Americans, who have a median of $126,000 in retirement savings, that’s an immediate financial wipeout. They will end up on Medicaid, the government health program that pays for about half of all nursing home and custodial care.
Those who live alone, are in poor health, or have chronic conditions are more likely than others to need long-term care. For women, there are special risks, since statistically women outlive husbands and may not have anyone to provide them with unpaid care. If paying for long-term care for a husband wipes out the couples’ retirement funds, the surviving spouse may be facing a long retirement living on nothing but their Social Security check.
Everyone approaching retirement needs a plan. The options are:
Long-term care insurance. The average annual premium for a 55-year-old couple was $3,050 in 2019. The older you are, the higher the cost and if you have chronic conditions, you may not qualify.
Hybrid long-term care insurance. Life insurance or annuities with long-term care benefits now outsell traditional long-term care insurance by a rate of about four to one. This requires committing a large sum of money up front but is a way to obtain long-term care insurance.
Home equity. Selling a home to pay for nursing home care is not the best solution. However, it may be the only solution, particularly if it’s the only asset. Reverse mortgages may be an option, if one person wants to remain in the home.
Contingency reserve. A wealthy family with assets may simply earmark some assets for long-term care, setting aside a certain amount of money in an investment that can be liquidated without penalty.
Spending down to Medicaid. People with little or no retirement savings could end up depending on Medicaid. There are ways to protect assets for spouses, but it requires working with an elder law estate planning attorney in advance.
The Petrosewicz Law Firm can assist you with your Medicaid needs. Contact us today at (281) 344-9455 or [email protected].
Reference: The Detroit News (June 10, 2019) “What to know about aging and long-term care costs”
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