August 17, 2019
Long Term Care Planning
Many Americans have a blind spot when it comes to retirement planning and this blind spot is…the real costs of long-term care.
Even though the majority of Americans will at some point need long-term care, few are planning for it. Many underestimate the costs and mistakenly believe health insurance can help cover it. At Hitchman Fiduciaries, our goal is to get you started in the right direction. In this blog, we will share some guidance on how you can get a jump-start on planning.
Will I Really Need Long-term Care?
The U.S. government estimates that 70% of people age 65 today will require some form of long-term care during their lives. Most of the time, that type of assistance is non-medical, including help with daily tasks such as bathing or needs that arise unexpectedly after a major illness or even an injury from a fall.
The costs of such care can easily outstrip retirement savings: A 65-year-old today can expect to incur $138,000 in long-term care costs over their lifetime, according to a 2017 Bipartisan Policy Center Report.
Getting a Realistic Picture of the Costs
This is something people can do easily and early. AARP has a long-term care calculator that lets one find the average costs for different types of services, by state and metropolitan region, based on research by Genworth Financial.
The most expensive option — a nursing home — now averages $97,000 a year, according to Genworth’s 2017 survey of long-term care costs. Assisted living facilities — for those who can’t live independently but don’t require skilled nursing care — cost about $45,000. For those seeking to remain at home, hiring a home health aide or homemaker services costs more than $20 an hour. Other options include adult day health centers that charge an average of $70 a day.
Learn the Truth about Financing
According to the AP-NORC poll, 57% of Americans say they plan to rely on Medicare, should they ever need ongoing living assistance. But Medicare does not cover extended nursing home stays or non-skilled living assistance that make up the majority of ongoing care needs for the elderly.
More than half of Americans end up paying for long-term care out of pocket, according to the Bipartisan Policy Center report. That figure rises to nearly 70% for those receiving long-term care at home. Many Americans with severe long-term care needs quickly burn through their savings and end up turning to Medicaid, which is projected to account for 40% of national spending on long-term care services by 2030.
So it’s a good idea to take the time to research Medicaid rules, particularly what sorts of assets you might have to spend down to qualify. Research how other long-term care financing plans can affect your Medicaid eligibility. For instance, annuity payments may count as income, but reverse mortgage payments do not. The government website LongTermCare.gov provides a good overview of Medicaid long-term care coverage and eligibility.
Keep in mind that Medicaid regulations vary widely by state and could change over time.
Choosing the Right Plan – Turn to the Experts
Growing in popularity are “hybrid” insurance products that combine death benefits or annuities with long-term care benefits. People like them because if the long-term care benefits are never used, their heirs still receive the death or annuity payouts. But some financial advisors are wary of the plans because they are difficult to analyze.
Hitchman Fiduciaries can help you navigate the complexities of retirement policies and ensure you select the right one for you and your family’s future.
Make it a Family Affair and Consider Where You Live
Chances are high that relatives will be involved with long-term care, at least to some degree. Experts recommend having family discussions about preferences before a crisis occurs. For instance, you might be determined to care for a parent or spouse at home as long as possible before putting the person in a nursing home. But would that person feel comfortable with a home health aide or an adult day care center while you are at work?
Where you live definitely matters when planning for long-term care, especially if relatives live far away. Check out the condition of your home and whether it can be modified to accommodate disabilities.
To learn more about planning your families long-term care needs, call Hitchman Fiduciaries as we have experience that can help!
At Hitchman Fiduciaries, we stand beside you as you make important decisions for your family's future. We are prepared to ensure your wishes are observed to the fullest extent, giving you added peace of mind. No matter how difficult your situation may seem, we have experience you can trust and we help you reduce the burden you may be facing. Together, we can help with this important decision-making and give you greater peace of mind.
If you have any questions, don't hesitate to contact us today and we are conveniently located in beautiful Newport Beach, CA. Because of our years of experience, we understand your situation and the challenges you may be facing. We look forward to hearing from you.
Author: Lee Ann Hitchman, CLPF/MBA and Licensed Professional Fiduciary