Think long-term care isn’t an important retirement risk to consider? You may want to think again. Research suggests that most retirees will eventually deal with long-term care. The U.S. Department of Health and Human Services estimates that 70 percent of today’s 65-year-olds will need long-term care at some point in their lives.1
Long-term care is a broad term that refers to assistance with basic living activities such as bathing, mobility, meal preparation and more. It’s usually provided in the home or in a facility. In either case, it can be costly. A recent Genworth study found that a full-time home health aide cost an average of $4,000 per month in 2018. A room in an assisted living facility cost roughly the same amount.2
Unfortunately, many seniors fail to plan adequately for the risk. As a result, they’re forced to accept care that may not meet their standards. Or they may drain their retirement assets, leaving their spouse or other loved ones in a difficult financial situation.
Below are a few common mistakes to avoid in your planning. If you haven’t developed a long-term care strategy, now may be the time to do so. A financial professional can help you get started.
Mistake No. 1: Avoiding discussion about the topic.
Long-term care isn’t the most pleasant topic to discuss, especially with your spouse and children. No one wants to think about moving into a nursing home or transferring their spouse into an assisted living facility.
However, your family could be one of your most valuable planning assets. That’s especially true in the early stages of your health challenges. Care often starts with needing help with basic chores like errands and cleaning. Over time it can progress to more intensive help with things such as bathing, mobility or even medical treatment. Every situation is different, but many seniors are able to rely on their family for assistance in the early stages.
You may want to discuss the issue with your spouse, children and other loved ones before you actually need care. Get an idea of how they may be able to provide help. Could they balance assistance between their own work and home responsibilities? You may discover that they won’t be as reliable as you’d expected. If that’s the case, you may want to consider alternatives.
Mistake No. 2: Relying on Medicare or Medicaid to pay for care.
Medicare is a valuable resource for retirees. It provides health coverage for a wide variety of services, like hospitalization, doctor visits and even prescription drugs. It doesn’t cover everything, though. Very often, long-term care doesn’t fall under the Medicare umbrella of coverage.
Medicare will cover skilled nursing that’s related to a recent hospitalization for a specific illness. The goal of the care must be recovery and treatment. That’s usually not what’s involved in long-term care. In many instances, long-term care is for chronic, progressive issues like Alzheimer’s, and recovery isn’t an option. The care is more custodial in nature and involves basic lifestyle support. That kind of care often isn’t covered by Medicare.
Medicaid is also a helpful resource, but you have to have little income and almost no assets to qualify for Medicaid coverage. Also, Medicaid often won’t cover care provided in the home. While Medicare and Medicaid may provide coverage in some instances, it’s not wise to count on them for complete funding. You may want to develop other funding strategies.
Mistake No. 3: Failing to plan ahead.
The most serious planning mistake is failing to plan altogether. Unfortunately, too many seniors make this mistake. They believe that they’re too young to worry about long-term care or that they can rely on friends and family for support. Or they simply don’t want to think about the possibility of being in a facility or needing professional assistance in the home.
The earlier you plan for long-term care, the more options you may have available. For example, you could fund a health savings account to help pay for care. Or you could purchase a long-term care insurance policy to help cover the cost. Premiums for such policies are often more affordable if you are relatively young and healthy at the time of purchase.
Ready to plan your long-term care strategy? Let’s talk about it. Contact us at Grand Canyon Planning Associates. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.