Now more than ever, it’s imperative to consider every aspect of financial planning to secure a comfortable retirement as our loved ones enter their golden years — and that includes planning for their long-term healthcare needs.
In fact, this could be the one thing your family hasn’t included in their long-term planning that could have a devastating impact on your family’s financial security despite any carefully employed saving and investment strategies that are already in place. If you keep up with the national news, you are probably aware that the United States population is aging, creating new economic and workforce challenges—and catching many families by surprise if they haven’t adequately prepared for the possibility of future healthcare issues.
It is imperative that people prepare for long-term care and what may become an extreme financial burden, as the cost of assisted living for the elderly can be very expensive—and, in some instances, financially crippling. It is an often overlooked or misunderstood part of the financial planning picture.
Several considerations can help ensure a stable financial future, particularly for those who may need long-term care (LTC). Long-term care insurance helps cover costs for nursing homes, hospice care, adult daycare, and assistance for those in their advanced years who live at home with activities of daily living (ADLs), such as bathing, dressing, and eating.
People often mistake health insurance or disability insurance for long-term care insurance; however, these types of insurance generally do not include long-term care coverage. With that said, some health insurance plans may offer an additional LTC benefit rider, which can be added to a standard policy for additional premium payments.
Unlike traditional health insurance, long-term care insurance is designed to cover long-term services and supports,
including personal and custodial care, in a variety of settings such as your home, an assisted living facility, or a nursing home. These costs can be more than you might think and will most likely continue to increase over time.
Housing arrangements require thoughtful deliberation. Whether aging in place with necessary home modifications, moving to senior living facilities, or considering living with family members, the costs of each option must be scrutinized to make the best choice for your or your loved one’s future needs. For instance, in my experience, round-the-clock care in a nursing home can cost up to and even over $100,000 per year, which is often not covered by health insurance policies or Medicare. Granted, a full-time assisted living facility or nursing home will be the more expensive of the long-term care options, but at-home care and other forms of care can still be expensive.
Here is the most recent information available about long-term care-related costs in Louisiana from the Genworth Cost of Care Survey from 2021. Note that the costs are expected to increase by at least 3% with each year that passes:
Medicaid will cover LTC but is only available to people with very limited finances, which means most people will not qualify for Medicaid coverage, and without proper coverage, the out-of-pocket costs of long-term care can deplete savings and retirement assets rapidly. This could potentially completely deplete your savings, leaving nothing left for your beneficiaries when you are gone. Some people are fortunate enough to have assets available to withstand such high costs for several years, but most Americans simply are not, and will need to rely on long-term care insurance to cover these costs.
To give you an idea for the increased need for LTC, someone turning 65 today has almost a 70% chance of needing some type of long-term care service and support. One-third of today’s 65-year-olds may never need long-term care, but 20% will need it for 5 years or more, and on average women need care longer (~3.7 years) than men (~2.2 years).
Properly preparing as to avoid falling into this stressful situation involves an open dialogue with your family and a qualified financial advisor about overall financial status, which includes savings,
income sources, investments, debts, and other financial obligations. Understanding the full financial picture, including the potential need for elderly care is crucial when assessing one’s long-term financial goals.
There is a wide range of LTC policy options and different price ranges. Much of the pricing depends on your age and health conditions and the amount of coverage desired. I advise consulting a financial professional, and getting multiple quotes from various insurance companies to see what plan will fit your needs and budget best.
Navigating financial planning for your elderly loved ones is a multifaceted and ongoing process. It requires a proactive and open approach,
frequent reassessment, and, often, professional advice. By strategically addressing each aspect of your family’s financial needs, you can significantly contribute to their peace of mind, and yours that this crucial element has been included in your overall financial plan to maximize your family’s quality of life in future retirement.
