Most people don't think about long-term care until they or a loved one needs it. Long-term care is a type of care that includes personal and medical care services for people with chronic illnesses or disabilities.
Long-term care can be provided at home, in the community, or in institutional settings such as nursing homes or assisted living facilities.
Home care and people wishing to age in place are becoming much more popular but quite expensive. Home health agencies can cost as much as $30+ per hour.
Long-Term Care Fast Facts
According to Census Bureau, 73 million baby boomers will be 65 and older by 2030. This stat shows that there is an aging population in the United States. Therefore, the demand for long-term care services is expected to grow rapidly in the coming years.
Currently, there are already limited beds and declining staffing in nursing and assisted living facilities in the country. It is advisable to plan for long-term care needs.
Without a plan, the cost of long-term care can be very expensive and quickly add up. Depending on the state and facility, out-of-pocket costs could be upwards of $200 per day for skilled nursing care.
Another alarming stat is that there is a 70% chance that someone turning 65 will need some long-term care services. Although this number may be intimidating, several options are available to help offset the cost of long-term care.
Long-Term Care Options
You don't have to grope in the dark when it comes to long-term care planning. There are plans available to help cover long-term care costs.
Long-Term Care Insurance (LTCI) Policy
As the name suggests, LTCI is insurance that helps cover the cost of long-term care services. Enrolling in an LTCI policy when you are younger and healthy is important to keep premiums down. Doing so can also keep your benefits as high as possible.
Most LTCI policies have a waiting period before benefits kick in. This is usually around 90 days. After the waiting period, the policy will cover a certain amount per day for a set number of years.
Some LTCI policies also have an inflation rider. This helps to keep up with the rising cost of long-term care services.
The younger you are when you buy an LTCI policy, the less you will pay in premiums.
Continuing Care Retirement Community (CCRC)
A CCRC is a retirement community offering on-site independent living, assisted living, and skilled nursing care services. When a person residing in a CCRC needs more care, they can transition to skilled nursing care on the same campus.
One of the benefits of a CCRC is that you can prepay for future care by moving into the community. This can be a good option for budgeting out long-term expenses.
However, CCRCs can be quite costly. The average entrance fee is $300,000. Additionally, monthly fees can range from $500 to $3,000.
No Plan (“It Won’t Happen to Me”)
You can live in the hope that you are in the 30% chance of not needing long-term care services. But this is not a good enough reason to forego a long-term care plan.
Without a plan, you will have to pay for long-term care services out of pocket. These costs can quickly add up and be very expensive.
For example, the average cost of a private room in a nursing home is around $100,000 per year. The cumulative expenses can quickly deplete your savings and leave you financially struggling in retirement. Additionally, Medicare does not cover most long-term care services.
Conclusion
Planning for long-term care needs is important to ensure that you are prepared for the future. Several options are available to help offset the cost of long-term care services.
LTCI and CCRCs are two popular options. Both have their pros and cons. LTCI is less expensive but has a waiting period for benefits to kick in. CCRCs are more expensive but offer the benefit of on-site care services.