Why long-term care costs can be a ‘huge problem’

Long-term care costs can be a significant financial burden for many households, with expenses often exceeding $100,000. According to a recent report by the U.S. Department of Health and Human Services and the Urban Institute, over half of Americans who turn 65 today will develop a disability that requires long-term care. This care may include assistance with daily activities such as bathing, dressing, and eating, which can be costly.

The average future cost of long-term care for someone turning 65 today is estimated to be around $122,400, but for some individuals, the lifetime costs can reach into the hundreds of thousands of dollars. This amount is out of reach for many Americans, highlighting the importance of planning for long-term care expenses in advance.

Despite the potential financial impact of long-term care, many households are unprepared for the costs. A survey by the Employee Benefit Research Institute found that 73% of workers anticipate needing to provide long-term care for a loved one in the future. However, only 29% of these future caregivers have estimated the cost of care, with many underestimating the expenses involved.

Insurance coverage for long-term care is limited, with health insurance typically not covering long-term care services and Medicare only partially covering certain types of care. Medicaid is the largest payer of long-term care costs, but eligibility is based on financial need, requiring individuals to exhaust a significant portion of their assets before receiving benefits.

Long-term care insurance policies can help offset some of the financial burden associated with long-term care expenses. However, few households have this type of coverage, with traditional stand-alone policies often being expensive. Hybrid insurance policies that combine life insurance and long-term care benefits may be a more cost-effective option for some individuals.

Planning for long-term care costs can be challenging due to the unpredictable nature of these expenses. It is essential for individuals to be proactive about their long-term care planning, considering factors such as their family history, risk of needing care, and the type of insurance coverage that best fits their needs. By taking steps to plan for long-term care expenses in advance, individuals can better prepare for the financial challenges associated with long-term care. Getting sick and needing care is something that can happen unexpectedly. Many people make the mistake of not thinking about their long-term care needs and logistics until it’s too late. Financial planner McClanahan emphasizes the importance of discussing these matters with family members well in advance.

It’s important to consider various questions when planning for long-term care. Are there family members who can provide care or offer financial assistance? Will you self-insure or purchase long-term care insurance? Who will manage your bills and insurance claims? Do you have advance healthcare directives in place to outline your wishes for end-of-life care?

Deciding whether to age in place or move to a care facility is a significant decision. Aging in place can be a more cost-effective option if you don’t require round-the-clock care. However, it’s essential to ensure that your home is suitable for aging in place, with considerations such as stairs, bathroom accessibility, and overall safety. In some cases, relocating to a different home or state with lower long-term care costs may be a viable option.

Living in a rural area can pose challenges in accessing long-term care services, so it’s important to plan accordingly. By being proactive and thinking through these decisions in advance, families can potentially save money in the long run. Reactive decisions often come with higher costs, so taking the time to plan ahead can lead to more level-headed choices.

Ultimately, discussing long-term care needs and logistics with family members and financial advisors can help ensure that you are prepared for any future health challenges. By addressing these matters early on, you can make informed decisions that align with your wishes and financial circumstances.