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Long Term Care 101: Part 2 - The Cost


Money Machine

Last week we kicked off Long Term Care Awareness Month by demystifying what is an intimidating and confusing subject for many people by starting with the basics: what is it, who needs it, and why is it one of the biggest financial threats you could face in your life. This week, we're talking cost. Just how expensive is it? What kind of a dent can it put in your retirement savings?

What's All the Fuss?

With nearly 80 million boomers entering retirement over the course of the next 10 years, we are seeing a large demand on long term care services across the board, and the result is it is one of the contributing factors to driving up the costs of care, at a rate of about 4% a year. The other reasons for costs rising? Sicker patients, employee retention challenges, and wage pressures to name a few.

You might be wondering why this wasn't really anything you heard your parents or grandparents (depending on your age) talking about if it's such a big deal. But the reality is that this wasn't really an issue that our grandparents had to worry about. But it's a very big deal now, and it's not going away. With the advances in science and medicine we are now living longer than ever before. So your money now has to last you much longer, and if you make it to age 65, the chances of you needing long term care at some point in your life is 70%!

Most people know and understand so little about long term care because the conversations just aren't happening enough. So unless you've had personal experience with a parent or grandparent who needed long term care, or know someone who did, when you do experience it all of the details, and the price tag attached to it are a complete shock. At that point you're scrambling to figure something out, and it can have disastrous results. (For you and your loved one). This is why we're committed to starting the conversation.

Current Costs

So how do you prepare for it? Just how big of a price tag does this kind of care come with?

When you hear the words "long term care", chances are you automatically think "nursing home". That's because for decades, that's the way long term care policies have been marketed to the public. But in reality, long term care insurance covers care that can be received in a variety of ways. The way we live our lives has changed, and long term care insurance has changed to accommodate it. Many people prefer to be able to stay in the comfort of their own home while receiving care, and understandably so. But care can also be received in a nursing home, an adult day care facility, and a whole variety of other ways.

For the purpose of not overwhelming you with numbers we will go over costs for two types of care in this article: Nursing home care, and care at home from a home health aide. Every year Genworth (a large player in the long term care market) puts out a "Cost of Care" survey to help families understand the costs of long term care across the United States, and has become a valuable planning tool. They covered 440 regions of the U.S., and 15,500 completed surveys. The numbers in this article are taken from their 2018 Survey.

So let's take a hard look at the numbers . . . as of 2018, the annual national median costs of care for 1 YEAR in a semi-private room in a nursing home is $89,297! That works out to be $7,441 a month. Do you have that kind of money just sitting around burning a hole in your pocket? Probably not. If you want your own room, be prepared to pay a little over $100,000 for it. So what about if you want to stay at home and receive care? The annual national median costs for 1 YEAR of home health aide care is $50,336! Or $4,195 a month.

Let me clarify that these are national median costs, and that these numbers will change depending on where in the United States you live. These numbers will fluctuate from state to state, and even within a state. For example, if you live in the mid-west these numbers will likely be lower for you. If you live in California, and specifically in the San Francisco Bay Area, these numbers will be even higher than the ones listed above. But if you live further inland in California they might go down a little bit. But when taking a look at over 440 regions across the U.S., these are the average costs. (Working with the right agent, they can simplify the planning process for you and guide you through the steps and questions you need to be asking yourself.)

The Real Numbers You Need to Be Concerned With

Remember, the numbers given above are for what long term care services costs now in 2018. But you probably don't need care right now. But if the above numbers are enough to scare you, sit down before you keep reading. What if you're 50 years old and you're realistically 20 years away from possibly needing care? It's going to cost a lot more 20 years down the line. And THAT'S the cost that you need to be concerned with.

What costs you $89,297 now for one year in a semi-private room in a nursing home is estimated to cost you $161,280 in 2038. That works out to be $13,439 a month! What costs you $50,336 to have a home health aide come and provide care at home is estimated to cost you $90,912 in 2038, or $7,577 a month. Are you 30 years away from needing care? These numbers will all be even higher.

Not to pour salt in the wound, but the estimated length of a long term care claim is 3 years. Remember that the numbers above are all based on one year of care. Not 3. And these costs are for one person. What if you and your spouse end up needing care, whether at the same time or separately over the years? These numbers can get astronomical.

Take a look at these numbers and ask yourself what kind of affect it would have on your retirement, and standard of living if you had to pay for these costs out of pocket? And remember that Medicare does NOT cover long term care costs. What if you have a long term care need that lasts for a two year period, and it takes a chunk out of your retirement savings but your wife will likely live longer than you and will need all the savings she can get? This is why long term care is such a serious threat to your financial security. Paying for a couple of years of long term care can obliterate what took you a lifetime to build and save. And you deserve better than that. You deserve to have the type of retirement that you've always envisioned and worked so hard to build.

The Good News

You can prevent financial disaster from happening. You can throw a shield of protection around your assets from being depleted by paying for long term care costs. You can prevent your family from having to deal with the large financial, physical, and emotional stress of having to deal with everything themselves because there was no plan in place as to how any of this would be dealt with if it happened. You do this by leveraging a powerful product that was built exactly for this type of situation. It's called long term care insurance.

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Join us next week for Part 3, where we'll go over why planning for long term care is especially important for women, and why they need to plan early. Have a question you want us to answer about long-term care? Let us know in the comments below, or email us at: info@tenayainsurance.com

Ready to get started on your long-term care plan? Give us a call, we'll walk you through the process of getting the best plan in place for you.

Call Tenaya Insurance Services at (925) 322-8073 today!

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