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The Most Neglected Need in Financial Planning Nobody Likes to Think About Long-Term Care

If you found yourself among two groups of people, do you think you’d be more likely to be among the group consisting of 70 people or the group of 30 people? Statistically, of course, you are much more likely to be in the larger group.

That’s why it’s so important that you focus on long-term care costs. AARP estimates that 70% of Americans who are age 65 today will need some form of long-term care at some point, and that they (you) will need care for an average of three years.

And here’s the crescendo: The average annual cost of a private room in a nursing home (if a private room is even available) is $74,208, according to Genworth’s 2009 Cost of Care Survey. If you need care at home, licensed home health aides charge $18.50 an hour for 12 hours or more of daily care ($222 per day, or $6,660 per month).

The sad truth is that sometimes you find you need to pay for a nursing home and a private-duty aide, as nursing homes are often understaffed. That brings your monthly expenses to more than $12,000. That doesn’t include the costs for medical care, medications, diapers and such personal needs as laundry, haircuts and telephone service.

No wonder long-term care costs are the leading cause of poverty among retirees. In fact, half of all older Americans who live alone will spend themselves into poverty after only 13 weeks in a nursing home; the fastest-growing age group for bankruptcy consists of those who are older than 75, according to AARP.
Ask yourself how long you’d be able to spend an extra $6,000 per month. While you’re at it, ask yourself this: While you’re spending all that dough, what’s happening to your spouse, who is still living at home and incurring all of your household’s other expenses?

If you can’t afford to cover LTC costs, or if doing so would consume much of your life’s savings, then you’re a good candidate for a long-term care insurance policy — and the sooner you buy it, the better.

LTC insurance covers nursing, custodial and rehabilitative services for people who need ongoing assistance due to a chronic illness or disability. It can cover the cost of in-home care or care in a nursing home. 

Many people think they don’t have to worry because they have health insurance. However, those policies don’t pay for long-term care costs. Neither does Medicare (except for the first 21 days). Medicaid will cover the cost, but only after you and your spouse become impoverished. And if you’re planning on having a family member take care of you, well, do you really want your spouse or children to change your diaper? (Not to mention the stress and lost wages they’ll incur by being your caregiver.) 

LTC insurance is age-based; the younger you are when you obtain it, the less expensive it is. That’s why we talk about it even with clients who are in their 40s; the cost grows quickly as you enter your 50s and 60s. And there’s another problem with waiting so long: As we age, health deteriorates; once you develop a medical condition, you can’t obtain a policy at any price.

Nobody likes to think about long-term care, but you ignore the issue at your — and your spouse’s — peril. 

Ric Edelman has been providing financial advice to consumers for over 20 years. He is the best selling author of seven books including his personal finance classic, The Truth About Money, the award-winning The Lies About Money and his latest, Rescue Your Money. He hosts The Ric Edelman Show, which can be heard nationwide. His investment advisory firm, Edelman Financial Services LLC, manages over $4 billion dollars for consumers nationwide, has won more than seventy awards and has been recognized by Barron’s (1), Registered Rep(2), Research(3) and others among the best and largest financial planning firms in the nation. Ric served five years on the board of the United Way of the National Capital Area and in 2007 completed his two-year term as chairman of the board. Ric is a Registered Principal of and offers securities through SMH Capital Inc., an affiliated broker/dealer, member FINRA/SIPC. Visit Ric online at RicEdelman.com.

1. Barron’s ranking “Top 100 Independent Financial Advisors” (Aug. 31, 2009) based on assets under management, revenues the advisors generate for their firms, and the quality of their practices.

2. Research magazine cover story “Advisor Hall of Fame,” December 2004 (based on serving a minimum of 15 years in the industry, having acquired substantial assets under management, demonstrating superior client service and having earned recognition from peers and the broader community for how they reflect on their profession).

3. Registered Rep magazine cover story “Clean Machines – Top 50 Brokers,” September 2004.


 

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