November is Long-term Care Awareness Month. And when it comes to long-term care — such as a stay in a nursing home or the services provided by a home health aide — you’ll want to plan for the potential costs involved.
Of course, you might think that you’ll always be able to live independently, without requiring any assistance — and perhaps you will. However, the odds aren’t necessarily in your favor: About 70% of Americans who reach the age of 65 will need some form of long-term care in their lives for an average of three years, according to estimates from the U.S. Department of Health and Human Services.
And every type of long-term care is expensive. Consider these numbers, taken from the 2013 Cost of Care Survey produced by Genworth, a financial security company:
The national average rate for a private room in a nursing home is $83,950 — a jump of 24% over the past five years. And it’s not much cheaper for a semi-private room in a nursing home — the average cost is $75,405 per year, up 23% from five years ago.
A full-time home health aide costs, on average, $44,479 per year.
If you had to spend more than $80,000 per year for a nursing home, and you needed to stay in that nursing home for several years, what would it do to your savings? How would it affect all your financial goals?
Many people think Medicare will pay for long-term care expenses, but that’s just not the case. In reality, Medicare only covers a small percentage of long-term care costs, which means it’s typically up to the individual to foot the bills.
You’ve worked hard to position yourself for an enjoyable retirement, so it’s important to protect your income and assets from potentially huge long-term care costs. How can you deal with these expenses?
Essentially, you have a couple of options. First, you could “self-insure” by incorporating long-term costs into your future budget — but, as the above numbers indicate, that could be pretty expensive. Your second choice is to “transfer the risk” of incurring long-term care costs to an insurance company. A financial professional can assist you in choosing the right solution for your individual needs.
However, as important as it is to address costs, and ways of meeting them, it’s also necessary to look at some of the other factors that may be connected with the need for long-term care services. To illustrate: If you were to enter a nursing home, you might be suffering from a physical or mental disability that could keep you from handling your own affairs. So you may want to consult with your legal advisor to discuss a durable power of attorney, which would allow you to delegate your financial decisions to a relative, close friend or anyone else you might choose.
Preparing for the unexpected, including long-term care, takes time and careful planning. So why not observe Long-term Care Awareness Month by getting started on your plans? It can be time well spent.
Doug Drost is a certified financial planner for Edward Jones, 2262 Reno Highway.