Why Long-Term Care Risk Could Ruin Your Retirement Plan

With around 10,000 baby boomers reaching the age of 65 each day, there is an increasing demand for the care that goes along with it, which means that the cost of care is also increasing at an alarming pace. 

Statistics show that around 70% of people who reach age 65 will require long-term care. With such a high probability of this happening, and the increasing demand pushing prices higher, this is exactly why long-term care is a retirement risk that must be resolved. 

In this article, we’ll provide you with answers to the following common questions:

• What is long-term care?

• How much does long-term care cost? 

• What are the odds that I’ll need long-term care?

• How can I reduce long-term care risk?

By the way, if you’d like to increase your retirement savings WITHOUT risking your money to market losses... then make sure you watch our free video here.

What is long-term care? 

Many people think that long-term care services only refer to care that is given in a nursing home. But it can also help with home care, respite care, adult day care, hospice care and activities of daily living. These different types of care can take place in your own home, a nursing home, an adult day care facility, a hospice facility, or an assisted living facility. A lot of people aren’t aware though that Medicare and most health insurance plans do not pay for long-term care.

If you don’t have a plan to reduce long-term care risk, then you might have to spend a large portion of your retirement savings on long-term care expenses.

Did you know? The cost for home health aide services rose by 12.50% from 2020 to 2021.

Medicaid might offer some assistance, but in order to get that help, you basically need to spend down all of your assets first. Medicaid is the primary funder for Long-Term Services and Supports (LTSS), which is a joint federal and state program for helping people with limited resources to cover their medical costs.

Medicaid paid LTSS care will provide basic services only, therefore such residents would not get the highest standards of care. They would reside in lower quality homes, where such settings are not the most desirable. If the correct care isn’t given, then residents in nursing homes can develop new health concerns. These can include minor issues like pressure ulcers (bedsores), or more serious issues leading to their demise. Transportation services would also be covered for eligible Medicaid enrollees, though many people who need Medicaid assistance may unfortunately not qualify for it.

How much does long-term care cost? 

Older adults should consider the potential cost of staying in nursing homes, should they be needed. If you have few financial resources, then Medicaid services might be an option, and there is helpful qualification information on the federal government websites. Anyone with limited financial resources might be able to get additional assistance, so researching on a federal government site is a great place to start.

Private long-term care costs will vary based on many different things. For example; the level of care required, the care setting, your age, your health, and where you live. Based on recent statistics and research, here are some annual cost examples:

Home Health Aide = $61,776

Assisted Living Facility = $54,000

Nursing Home Facility (Private Room) = $108,405

Now, let’s look ahead to what these costs might be in 2030:

Home Health Aide = $95,835

Assisted Living Facility = $83,772

Nursing Home Facility (Private Room) = $168,172

Those numbers show an approximate 55% increase. But, the most worrying part is that these costs could go much higher! Inflation is very high right now, and health care inflation has been rising even more than normal inflation.

Also, these numbers are national median cost examples, which means they are right in the middle. But if you live in a state like California, then you can expect these costs to be much higher. In 2030, a private room in a nursing home facility might cost $226,494. That’s around 35% more in California than the national median cost… And, this is only for 1 year of care!

Did you know? Long-term care risk is actually higher for women, mainly because they often live longer than men.

Here’s a potential real life scenario, using the national median costs from above. If your own long-term care event were to happen in years to come, and/or you live in a state like California, then your actual costs could be much higher. 

Year 1: Home Health Aide = $61,776

Year 2: Nursing Home Facility (Private Room) = $108,405

Year 3: Nursing Home Facility (Private Room) = $108,405

Total cost for a 3 year long-term care event = $278,586!

Are you prepared for a potential $278,586 expense in retirement? What if you and your spouse both need care, would you be able to pay $557,172 to cover both of you?

What are the odds that I’ll need long-term care?

We are all getting older, and it’s inevitable that at some point we will get sick or hurt. So eventually, most people will need some type of care, either at their home or at a facility. Here are some quick statistics for you to consider…

• There’s approximately a 3% chance of having a house fire

• There’s approximately an 18% chance of having a car accident

• There’s approximately a 70% chance of needing long-term care

While discussing risk management, your health is definitely one of the many risk factors to consider. Poor diet and lack of exercise can lead to health issues, or maybe there are also some health concerns in your family history to be aware of. Human services may be available to assist with basic health and welfare needs, but it’s best to plan for long-term care separately as well.

A person's risk of needing long-term care services over their entire lifetime is around 50%, so 1 out of every 2 people. As our age increases, so does the chance of needing long-term care, with it rising to 70% by age 65.

Tip: Talk with your parents and/or children about long-term care. It not only impacts the people needing care, but also their loved ones.

Let me pause here for a second, and have you answer these two following questions…

1. If you did need care, how would that affect your family (spouse, children, etc.)?

2. If you did need care, how would you pay for it (government program, self-fund, long-term care insurance, etc.)?

By the way, if having guaranteed income for life and long-term care protection are important to you... then watch our free video here for tips on how to do both!

How can I reduce long-term care risk?

Planning for long-term care can be difficult, as there’s no way to know if you’ll ever truly need it. But an accident, injury or illness could change your life instantly. As always, the best time to think about these things is before they happen. By doing that, it enables you to make important life decisions while you’re still in control and fully able to do so. It’s important that you protect yourself, your loved ones, and your assets.

Traditional Long-Term Care v New Hybrid Long-Term Care 

Here are two of the main issues that people have with traditional long-term care. Firstly, it can be expensive, with ongoing and increasing costs. Secondly, you have to “use it or lose it”. On the other hand, some of the new hybrid long-term care options can actually eliminate both of these problems, with locked in premiums and money back options if you don’t use it.

Did you know? A recent survey showed that 80% of long-term care policies purchased were combination (hybrid) products, with only 20% being traditional long-term care products. 

Here are some long-term care insurance options for you to consider…

• Choose a plan that will give your loved ones all of your paid premiums back when you pass away, income tax-free, if you haven’t used it.

• Choose a plan that offers critical, chronic and terminal illness coverage, along with death benefit protection and a money-back option. You can protect yourself, and therefore your family, whilst also having the money-back option if needed.

• Choose a plan that has lifetime/unlimited long-term care benefits, which can also include unlimited benefits for your spouse.

• Choose a very specific type of plan that can instantly double, or even triple, the amount of money that you pay in. If you have money set aside for long-term care expenses, or other savings not working for you while you need long-term care protection, then you do have some great options available. (Example: If you have $50,000 set aside in a bank account, and $50,000 in a low interest CD, that would come to $100,000. You could instead put that money into one of these specific plans, and it could instantly give you $200,000 or $300,000 for future long-term care expenses.)

Finally, it’s essential that you know how to avoid long-term care risk in your retirement plan. If you’d like to learn which options are available to you, then you can schedule a free retirement consultation today.

Please remember that this is only one of the top 10 retirement planning risks to avoid. You can read more about other risks like how to avoid market risk and how to eliminate tax risk.