By FPA member Jane Nowak
Last Updated: June 7, 2010
One of the greatest challenges when planning for retirement is trying to predict our future heath care expenses. After age 65, we currently have Medicare to help with our medical needs. But, what about providing care for ourselves when we have trouble preparing meals, bathing ourselves or getting up out of a chair? Many folks mistakenly think that these needs will be paid for by Medicare. They will not. Eventually Medicaid can help pay. But, only after there has been a substantial 'spend down' of our assets. So, essentially we are on our own.
As we reach our 'golden years', many women are divorced, single or widowed. For many of us, our children and families are no longer living near us. Women face the prospect of outliving their spouse by three to six years. And, the longer you live the greater your odds of actually needing long-term care services. So, planning for long-term care expenses should be an imperative on every woman's retirement planning agenda.
Ways to Meet Long-term Care Needs
Currently, there are several ways to face the need to provide for long-term care including:
- Pay for it out of our savings (self-insure)
- Insure through long-term care insurance
- Spend down our assets and rely on Medicaid
- Rely on family and friends
If we are not independently wealthy, given the choice and the financial wherewithal, the superior option is to fund long-term care insurance. Long-term care insurance doesn't pay 100 percent of the bills and it is the most expensive option. But, if nothing else, insurance can help us to pay for much of the required care.
Statistically speaking most people need three to five years of some type of long-term care services. And, we will spend a minimum of $25,000 in today's dollars on long-term care. Please note that for many people the need for long-term care services far exceeds the $25,000 average minimum price tag. 2009 average cost for nursing home care is $219 per day: home health care aide, $21 per hour; and adult day care, $67 per day. These costs can vary greatly by state and city.
Who Should Consider Long-term Care Insurance?
Long-term care insurance is not necessarily for everyone. So, who should consider buying long term care insurance?
- You are over age 40, in good health and insurable
- You are single, divorced or widowed with no children
- You have a family history of Alzheimer's disease or cognitive impairment
- You have a history of longevity in your family
- You want a greater level of care than that which Medicaid will give you
- You have family members to whom you wish to leave your assets
Options If Long-term Care Insurance is Beyond Your Budget
If long-term care insurance costs are beyond your budget, you still have options. There are some recent changes and government programs that can help to ease the burden.
- Check out recent changes to long-term care policies that have made them more affordable to more people.
- In many states, if you fund your own long-term care insurance, there are Partnership Programs that currently limit the required 'spend down' to qualify for Medicaid.
- With the new Health Care Reform law there is a little-publicized provision of the bill, called the Community Living Assistance Services and Supports (CLASS) Act. The CLASS Act puts in place a national insurance pool, offered through employers to help workers pay for long-term care. Pay in for five years and receive a minimum of $50 a day. The benefits paid won't likely cover all of your long-term care needs, but it can definitely help.
With the 'graying of America,' the need for long-term care will impact many of us as patients, care givers or in many cases as both patients and care givers. Don't put off planning for your long-term care needs. Include long-term care as part of your retirement planning agenda. Talk with your financial adviser to see which option(s) are right for you.
As with all financial planning, now is always the right time to plan for your future financial well being and your long term-care needs. Learn more about long-term care insurance by reading the FPA brochure, "Choosing the Right Insurance For Your Life's Stages."
FPA member Jane Nowak is a Financial Planner with Kring Financial Management located in Atlanta, Ga. Jane's practice focuses on Women's Retirement and Financial Planning for Women.