February 17th is National Caregivers Day - a day that honors individuals who selflessly provide personal care, and physical and emotional support to those who need it most. It's also a great time to think about your own care needs in retirement, and what you can do to prepare for the monumental costs that come with it.
If you know a caregiver, show them some extra love today. While it can bring a lot of joy, caregiving can also take a toll on emotional and physical well-being.
While no one approaching retirement likes to think they'll necessarily want or need caregiving as they age, it's a probability many cannot deny. In fact, someone turning 65 today has almost a 70% chance of needing some type of long-term care services and support in their remaining years.
Long-term care is an essential aspect of planning for one's later years. It offers the necessary support to help seniors live as independently and safely as possible, even as their health and abilities decline.
What is Long-Term Care?
Long-term care refers to the ongoing support and assistance required by people who are unable to perform daily living activities due to chronic illness, disability, or old age. It includes a range of services like bathing, dressing, eating, and more. As the population ages and life expectancy increases, the need for long-term care becomes more prevalent, making it a crucial concern for retirees.
There are about 65,600 regulated long-term care facilities in the United States, according to a study from the National Center for Health Statistics. Together, these institutions serve over 8.3 million residents, including:
- 286,300 people in day-based caregiving
- 811,500 people in assisted living facilities
- 1,347,600 people in nursing homes
Over the next 10 years, the number of residents in each of these facilities is expected to grow sharply. If trends hold up, the number of nursing home residents could double by 2030.
Understanding the Types of Long-Term Care
It's important to understand the differences between types of long-term care facilities. When people hear the term, "long-term care" it's often misinterpreted to mean a senior is very ill and can't take care of themselves. However, long-term care can refer to anything from helping with daily activities, to those in a nursing home that requires around the clock care.
There are three main types of long-term care facilities in America:
- Nursing Homes provide skilled nursing, rehabilitation services, and 24-hour health services.
- Assisted Living Residences combine home, health, and supportive services while promoting self-direction and resident independence.
- Residential Care Homes provide room, board, personal care, medication management, and some nursing “overview,” but are restricted in the level of care they can provide and generally do not provide full-time nursing care.
Each type of care provides varying levels of support and assistance. Independent living facilities, for example, offer a more self-sufficient lifestyle. While assisted living communities and continuing care retirement communities fall somewhere in between. Providing varying levels of care based on an individual's needs.
Long-Term Care is Costly
The cost of long-term care can be substantial, and it's not covered by traditional health insurance or Medicare. On average, a year in a nursing home can cost around $100,000, and the cost of in-home care can be just as high.
In 2023 without insurance, monthly long-term care costs could see you paying:
- $5,148 for a home health aide
- $1,690 for adult day care
- $4,500 for assisted living
- $7,908 for a semi-private room in a nursing home
- $9,034 for a private room in a nursing home
As mentioned, individuals 65 or older have a 70 percent chance of needing long-term care services in the future, but only 11 percent purchase long-term care insurance. The rest are left scrambling to cover costs when the time comes.
Long-Term Care Insurance Options
Long-term care insurance can help retirees pay for the cost of care without dipping into their savings. It's important to research and understand the different types of policies available and their coverage before making a decision.
According to the American Association for Long-Term Care Insurance, you should expect to pay the following for a long-term care insurance policy with a $165,000 benefit:
| Person | Age | Monthly Premium |
|---|---|---|
| Single male | 55 | $185 |
| Single female | 55 | $308 |
| Couple | 55 | $418.75 |
| Single male | 65 | $261.25 |
| Single female | 65 | $438.75 |
| Couple | 65 | $595.83 |
Long-term care insurance can be significantly more costly than other types of insurance, but long-term care will likely cost thousands of dollars per month. The premiums can be expensive, but they’re definitely worth it for people anticipating a need for care.
Medicare Does Not Cover Most Long-Term Care Expenses
Medicare does not pay for most long-term care expenses because it is primarily designed to cover acute care services for short-term illnesses and injuries. Long-term care is more focused on providing support for individuals with chronic conditions or disabilities that require ongoing assistance with activities of daily living, such as bathing, dressing, and eating. This type of care is considered custodial in nature and is not covered by traditional Medicare.
Medicare only covers a limited amount of skilled nursing facility (SNF) care following a hospital stay, and even then, the covered care must be considered medically necessary. In-home care, assisted living facilities, and adult day care are not covered by Medicare.
To cover the cost of long-term care, many individuals opt for private long-term care insurance, Medicaid, or a combination of both. Medicaid is a joint federal-state program that provides health coverage for individuals with low income, but eligibility requirements and covered services vary by state. Long-term care insurance, on the other hand, is a private insurance product that individuals can purchase to help cover the cost of long-term care services.
Retirees should understand what their Medicare coverage includes and plan accordingly.
Planning is Key
Planning ahead for long-term care needs is essential to ensure that retirees have the resources they need to receive the care they require. This can involve creating a financial plan, researching care options, and discussing wishes with loved ones.
With the likelihood of needing long-term care increasing with age, it's crucial to consider this aspect in your overall retirement plan. By taking a comprehensive approach to financial planning, individuals can ensure that they have the resources necessary to pay for the level of care they may require in the future.
Let's Get Started
Agemy Financial Strategies can help individuals navigate the complexities of long-term care planning. Our team of Fiduciariescan assist in evaluating your current financial situation, identifying potential risks, and developing a customized plan to meet your long-term care needs.
By working with Agemy Financial Strategies, you can have peace of mind knowing that you have a solid plan in place to address the potential challenges of needing - and paying - for care throughout your golden years.
If you have any questions or want to set up a complimentary strategy session, contact the retirement income experts at Agemy Financial here today.