Posted by Denise Kovach, CFP®, AIF®
We are living longer due to healthcare innovations, which is the good news. However, the bad news is that at least 70% of people over the age of 65 will require long-term care services at some point. People are often confused that Medicare and private health insurance programs pay for these services, but they don’t. Long-term care costs thousands of dollars per month with the average stay being three years.
I am currently looking at an assisted living facility for my Mother. A $4,000 down payment is required, and the cost of a small, one-bedroom apartment is $3,995 per month. Plus, depending on the level of assistance that she will need, there will be another $700 to $1,700 per month cost involved.
What if she needed a semi-private room in a nursing home? It just got more expensive. According to Genworth, that monthly cost averaged $6,844 in 2016.
The most common reasons people require long-term care are dementia, cancer and stroke. When my Dad was alive, he was in an assisted living facility because he had dementia. My Mom is needing assistance because she has cancer and is fragile.
The costs associated with long-term care are high. Medicare will only pay for skilled services or rehabilitative care in a nursing home for 100 days. Health insurance will pay some healthcare service costs, but only for specific circumstances for a very limited amount of time. Medicaid may pay for it, but only if you have limited assets and income. Long-term care insurance is a way to cover these costs.
You can opt to buy long-term care insurance that you pay for like an automobile policy, but if you don’t use it, you lose it. And, premiums can increase over time. Other options include paying a lump sum amount to purchase coverage that will never increase in price and if you don’t use it, it remains a part of your estate.
I am often asked, “When is it the appropriate time to buy long-term care insurance?” There is not a set age at which it is best. However, its cost generally increases with each year older you are. You may consider buying it when you are younger, healthier, and more likely to be approved for coverage.
Long-term care costs can easily wipe out your retirement nest egg. If you are getting older, now is the time to take steps to protect the assets you have spent your life accumulating and start looking into the appropriate coverage for you.
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Nancy Hecht & Denise Kovach