The average life expectancy in the US is currently 79.8 years; 77.4 for men & 82.2 for women (WHO; World Health Organization). A recent study by The Measure of America in 2013–2014 lists Utah as the 10th best state for life expectancy in the U.S. with an average age of 80.2. A life expectancy article published by Ray M. Merrill, a professor at Brigham Young University show’s that the life expectancy for non-smokers vs. smokers in Utah increased by 7.3 years.
As the average age increases, we require care in some form beyond what we can do for ourselves. And this care comes at a cost. As we age, we require care in some form. Many individuals want care in their own home. They don’t want to leave the comforts of the home they’ve been in for years. Some are fortunate to have adult children that can both afford and have the time to take care of their parents. KSL published an article that Utah ranks dead last in providing support for family caregivers (goo.gl/mxKyOh June 29, 2014). There is a cost to having family members provide care. Someone has to expend resources and there’s always some costs with in home care. Many don’t know that long term care planning can provide cash benefits for in home care, even if family members provide the care.
Not all are fortunate to have their children nor family members take care of them for as long as needs be. Some are forced into care outside of home. The costs associated with outside of home care increase dramatically.
Many don’t know what the cost of care is until they are faced with searching for a care facility for their parents or a loved one. The Average Cost of Long-Term Care in the United States in 2013: A semi-private room in a nursing home $207/day or $6,289/month; a private room in a nursing home was $230/day or $6,996/month; for care in an assisted living facility (one-bedroom unit) $3,450/month; $19 per hour for a home health aide; $18 per hour for homemaker services; $65 per day for an adult day care health care cent.
The rate of inflation for senior care has been outpacing all other sectors in the economy. A MetLife survey in 2011 of 2,003 nursing homes, 1,492 assisted-living facilities, 1,644 home-care agencies and 1,341 adult-day services in all 50 states and Washington, D.C., between April and August showed the following:
A private nursing-home room climbed 4.4, an Assisted-living rates went up even more – 5.6%, and adult-day-care services also saw a 4.5% increase.
The percentages of risk of requiring Long Term Care compared to other events in life are much greater than any other type of risk in life other than dying. The risk of losing a home to a fire is 1 in 1,200; having a car accident is 1 in 240; risk of hospitalization costs at least $30,000 or greater is 1 in 5; and needing long term care is 1 in 2.
If you haven’t planned yet, you’re in the majority – most people we meet haven’t thought seriously about long-term care. In your mid-50’s, you probably thought of long-term care for your parents, but did you think that planning for yourself at the same time might save some of the headaches your parents had? In our experience, what people want are options – they want to be able to stay home or go to a facility, depending on their health; rely on the kids or hire a nurse, depending on the costs; and stay close to home or their kids, depending on where everyone lives. What people don’t realize is that the longer you wait to plan for long-term care, the fewer choices remain. For example, if you’re committed to staying home, but there’s no room in the budget for a nurse, you must rely on family and friends. You can preserve the choice by having a proper plan before time starts choosing for you.
As a rule of thumb, you should start thinking about long-term care in your early to mid 50’s. Not sure what to consider? Here are some simple steps you should take to get started.
Decide how you want to pay for care. You can either pay a little now or much more by prolonging the inevitable by self-funding. The alternative is to not have any assets and be relying on the government pay for care. You don’t know how much long-term care will cost when you need it, but you can bet the greater the cost will be than it is now. You need to be realistic about how far your savings can and will go when the time comes that whatever form of long term care is needed.
If you are waiting until you reach retirement age before giving serious thought to consider long-term care options, you’re not alone. The only downside is it’s just not wise planning. This is the single greatest cost for any individual or couple they’ll experience in retirement. If you have or are thinking to procrastinating, your options narrow as time progresses and costs increase. Just in the last week I had a couple in their late 50’s wanting a long term care policy put in place right now because they went through this with one of their parents and had to spend in excess of $500,000 out of the families pocket for care before their mom passed away due to the lack of planning. Nest eggs that took a life time to accumulate that are intended to be used for other desired items or for inheritance gets gobbled up in a short period of time when proper planning is not in place.
By waiting to cross that bridge when we reach a certain milestone in life is not wisdom. Life Happens.
If one does not have a long term care insurance plan, by default you have chosen to self-fund everything out of your own pocket as your first choice. After that, you are then opting for government care through Medicaid. The level of care is not always the same quality of care that is desired from family members when opting to rely on government funding.
What options are available for long term care planning?
Long Term Care plans may seem expensive, yet they are much cheaper when care is needed to alternatively paying for care out of pocket when needed. You can get long term care plans in your 70’s for traditional long term care plans. Traditional long term care plans require medical records for underwriting.
Short term care plans are also alternatives to a long term care plan. Short term care plans provide coverage up to 12 months of coverage starting on day one. This is very helpful so there is not an elimination period for coverage and it can also be care in one’s own home or in a facility. This helps cover the waiting period of a long term care plan. Many individuals are combining both a short term care and long term care coverage together to cover both the elimination period of the long term care with the coverage from the short term care plan.
Other options are hybrid plans that provide cash value build up and death benefit in addition to long term care benefits. So if care is never needed nor used, your beneficiaries receive a tax free death benefit goes to the family. This is a very attractive alternative to traditional long term care for many. There are other products that can be purchased up to age 85 and for those in average or fair health with.
There are also benefits available for seniors that are currently receiving care that is a fully underwritten plan tied to an annuity. This is the only option for those who are currently receiving care up and can go up to age 99.
Ben Gerritsen is a Long Term Care certified advisor. He is a partner of: Insure My Life Right, LLC, an independent insurance agency.