One of the big eye-openers of adulthood is when roles reverse and the child must care for the parent. It’s one of the toughest problems we face as we get older – especially when our parents don’t have any long-term care plans or money set aside.
A Painful Balancing Act: Long-Term Care Choice and Budget
Finding the balance between securing safe, comfortable care for elderly parents and paying for it can be almost impossible. Many people are surprised to discover that Medicare doesn’t cover long-term care costs, also known as custodial care.
This type of service includes daily living assistance such as:
- Bathing
- Eating
- Chores and housework
- Going to the bathroom
- Moving around
If you’re working full-time, raising children and responsible for your parents’ daily needs, this can be an overwhelming load. Now imagine you’re the parent – and your children have to make these decisions for you.
The #1 Concern: What Will Happen When I Can’t Care For Myself?
According to a recent survey by the Society of Actuaries, long-term care is tied for first place as the number one concern of retirees. The other concern is inflation.1
It’s not a big surprise that most people rank this as their chief worry. If you have had to make long-term care plans for a loved one, then you know how expensive it can be. Not to mention, the better facilities cost more money.
This comes with another set of questions: Will my loved one be properly cared for? Will my mother be neglected? Will my dad be happy and stimulated? What will their quality of life be like?
These questions are naturally applied to ourselves, too. We want to receive great care when we can no longer care for ourselves. We recognize that just because our bodies aren’t working optimally, our minds still crave stimulation and engagement. We want to retain as much control over our lives as possible.
The reverse is also true. How will we be cared for if we are unable to make decisions? These are not things we want to think about – especially while we’re young, healthy and active… but that’s precisely when we should be thinking about them.
For Women, Planning Is Particularly Important
Women more than men should consider preparing for long-term care. A gender gap in health means that figuring out how to pay for custodial and medical services is especially important for females. There are three major reasons for this:
➢ Women live, on average, 5 percent longer than men.2
➢ Because women outlive men, widowed women can’t depend on spouses to care for them.
➢ Women suffer from chronic diseases more than men do.3
The Worry Is There, But Not the Preparation
The staggering result of all this worry is that most people do little to nothing to prepare. In addition to not preparing, the Actuary survey showed that pre-retirees underestimate life expectancy. In 2015, the median of pre-retirees stated that they will live until 85, despite the fact that 55 percent of those reported at least one family member living past 90.
As far as a financial strategy for long-term health care, only 33 percent of those surveyed purchased a guaranteed lifetime income product.
“In terms of a planning horizon, 17 percent of pre-retirees plan for five to nine years, and 19 percent plan for ten to 14 years. By comparison, 38 percent of pre-retirees have either not thought about their planning horizon or do not plan ahead.”
– 2015 Risks and Process of Retirement Survey
More Expensive Than a Mortgage
In 2016, the average cost of a private room in a nursing home was $7,698.4 This is almost six times the amount of the average monthly mortgage payment.5
Although assisted living facilities are about half as much as a nursing home, they’re still expensive at $3,628 per month, especially if you’re on a fixed income.
Will You Need Long-Term Care?
There are no guarantees when it comes to health – which means you should plan on needing it and try to live a healthy lifestyle so that you don’t.
The numbers, however, point to the fact that more than half of us will need some form of assistance as we get older.
➢ In 2012, nine million Americans over the age of 65 required long-term care. That number is projected to jump to 12 million by 2020. 6
Considering Your Options
1. Long-term Care Insurance
Long-term Care Insurance is one of the most popular options as it drastically reduces the cost of care if you need it.
The American Association for Long-Term Care Insurance reports that the average married couple, age 55, would pay $1,816 per year for a policy with $162,000 in coverage for each. A 3-percent inflation protection rider is also available for about $1900 more per year.7
The earlier you lock in a rate, the better. A good time to invest in this insurance is around age 52.
2. Life Insurance With a Long-term Care Rider
This might be a good option as there are a couple more benefits with this option than a traditional long-term care insurance policy. Basically, you will get the death benefits that come with a life insurance policy, you will pay about the same – or less – in monthly payments – and enjoy approximately the same coverage you would receive with long-term care insurance through the rider.
3. Fixed Index Annuity
A fixed index annuity with a single premium is yet another route to take on your way to long-term care preparation. Some annuities offer a long-term care doubler benefit which pays twice as much per month as it would if you were not in long-term care. This is an amazing perk and one that could save you tons of money down the road.
Bottom Line
Don’t wait to get ready for long-term care. Even if you are running marathons in your 60s, the time might come when you need some form of assistance. It’s better to have a plan in place now than to rely on your children or social services to help you later.
1https://www.soa.org/press-releases/2016/survey-examines-retirement-concerns/
2http://www.bbc.com/future/story/20151001-why-women-live-longer-than-men
3http://www.cwhn.ca/en/resources/primers/chronicdisease
4https://www.genworth.com/about-us/industry-expertise/cost-of-care.html
5http://themortgagereports.com/20589/freddie-mac-mortgage-payments-homeownership-costs-may-2016
6http://www.forbes.com/sites/jrose/2016/03/22/long-term-care-insurance-alternatives/#1af57501a192
7http://www.cnbc.com/2016/03/15/long-term-care-coverage-peace-of-mind-at-a-price.html