4 Ways to Prepare for Long Term Care Expenses
Many individuals have an unrealistic idea of what their golden years will be like. We would all like to think that we will remain healthy and vibrant during our retirement. This might happen for some, but most of us will likely require some type of ongoing medical care when we get older.
As the Baby Boomers continue to enter retirement, there will be a sharp increase in health care needs, which will create a shortage of caregivers as health care costs continue to rise. With the skyrocketing cost of health care, a long-term care need could become a major financial burden on you and your family. This is why it is essential to think about this ahead of time and take steps to ensure these expenses will be paid. Here are four important ways to prepare for long-term care expenses when you retire:
Consider your Options
Long-term care is generally defined as the need for ongoing assistance in performing essential daily living activities; such as feeding, bathing, dressing, using the bathroom, moving from a bed to a chair (and vice versa) and continence, in addition to having Cognitive Impairment (Alzheimer’s or dementia). Depending on your preferences and medical needs, you may receive this care in a nursing home, assisted living facility, senior day care center, or at home. Each of these options has its advantages and disadvantages; do your research and take a look at which option you prefer for receiving ongoing care during retirement.
Evaluate the Costs of these Options
Think about the expenses related to each long-term care option. For example, a private room in a nursing home might cost around $10,000 – $15,000 per month, depending on what part of the country you live in. A one-bedroom apartment at an assisted living center might be around half that cost, and the cost of having a caregiver come to your home may be even less than that, depending on the level of care you require. Find out the cost of long-term care options in your area, and what you think you will be able to afford.
Understand what Medicare and Medicaid will Cover
Individuals over the age of 65 may be able to receive some assistance from Medicare and/or Medicaid. There are important differences, however, in how these programs are administered. Medicare is available to all who qualify but their scope of coverage is quite limited. Medicaid covers far more services, but you need to meet income and asset requirements (which vary depending on the state you live in) to be eligible.
Decide How to Pay for Long-Term Care
There are three ways you can pay for ongoing medical care:
- Out of pocket/tap retirement savings
- Rely on family/friends to cover the cost of care
- Long-Term Care Insurance
If you are concerned about draining your retirement savings or becoming a burden to loved ones, long-term care insurance is worth considering. A long-term care policy can provide predictability and peace of mind during your golden years.
The cost of long-term care insurance depends on your age and health — the younger and healthier you are, the lower your premiums. This is why it is best to explore this option sooner rather than later. You may also want to consider a hybrid policy that combines two essential coverages — long-term care and life insurance — into one product at a lower price than purchasing the two policies separately.
Medical care is becoming more expensive every year, and when you reach the age of 65, you have an average life expectancy of an additional 19.2 years. In addition, roughly 70% of those 65 and older will need some type of ongoing medical care during their golden years. Take time now to evaluate your options, costs, available government assistance, and how you plan to pay for these expenses. This will make it much easier for you and your family to handle your long-term care needs when the time comes.