“… In this world nothing can be said to be certain, except death and taxes,” wrote Benjamin Franklin in 1789. But according to statistics from the U.S. Department of Health and Human Services, there may be one other item that should be added to that list. On the DHHS website www.longtermcare.gov, they state that fully 70 percent of people turning age 65 will require some type of long-term care during their lives.
>> See more statistics on the odds of needing long-term care.
Yet most Americans do not realize (or are in denial) about their likelihood of needing adult care as they age. A recent survey conducted by PlanBeyond spotlights this concerning disconnect. The study asked people age 45 to 64 what they thought the odds were that they would need long-term care at some point. Of the respondents, two-thirds underestimated the chances that they would need this type of assistance.
But even more alarming: one-third of survey respondents age 55 to 64 said they expected Medicare to pay for any long-term care they might require, when in reality, Medicare typically does not cover this expense. This lack of understanding among seniors about who must pay for adult care contributed to the fact that, in recent years, roughly one in four medical bankruptcies were people 55 and over. This is also why preparing for long-term care needs is so critical for aging adults–both financial planning and logistical planning.
The financial costs of long-term adult care
The cost of long-term care can vary dramatically from state to state and depending on the level of care required. So how is one to plan? The U.S. Department of Health and Human Services has a useful cost estimator tool on their website to help you understand what sort of expense you might be looking at in your state, based on care-level. Once you get an idea of cost, it is easier to think about how you will pay for that care if and when you need it.
While some will qualify for public assistance programs that help pay for long-term care, most seniors must use their own out-of-pocket money and thus a combination of payment methods are utilized including:
- A long-term care insurance policy
- Personal income and retirement savings
- A universal life insurance policy
- Reverse mortgages
Long-term care insurance policies are certainly a popular option when it comes to paying for this type of elder care, but with life expectancies increasing, the costs of these policies have increased too. If you have or are considering purchasing a long-term care insurance policy, I strongly encourage you to read my previous blog post, A Concise Explanation of Long-Term Care Insurance—Part I, which explains how the policies work and what types of adult care they cover.
The logistics of finding a caregiver
On top of the potential financial challenges that arise when long-term care is needed, it can also be very difficult to find the right person to care for you or your loved one at home. In an effort to save money, many people assume a family member will be able to assist them when the time comes, but that strategy comes with its own costs.
According to a study conducted in 2015 by the AARP Public Policy Institute, approximately 43.5 million American adults served as unpaid caregivers over a 12-month period, resulting in lost wages and reduced 401(k) contributions. On top of that, nearly 50 percent of those family caregivers spent over $5,000 of their own money each year on caregiving-related expenses such as food, medicine, or household goods for the senior. All-in-all, having a loved one serve as caregiver can be a costly proposition.
But finding a non-family member to provide in-home adult care comes with its own challenges. A recent article in The Washington Post underscored this point. The reporter, A.K. Whitney, tells us about her great-aunt, who had suffered a number of recent falls, including one that resulted in a broken arm, thus requiring assistance with day-to-day living. Whitney explains that between a home-healthcare worker shortage, lack of government oversight, and the expense, she had difficulty finding a reputable company that offered the right level of in-home care for her great-aunt's situation.
The good news is that with our aging population, the adult care industry is booming. More and more agencies are opening for business, and that competition is good for senior-consumers. Check out Whitney's article to learn more about the issues she encountered during the process and some advice on how to overcome these challenges.
Acceptance leads to better planning
If we are realistic about our odds of needing long-term care at some point as we age, it becomes easier to accept–even embrace–the advance planning it requires. There are many choices and scenarios to consider, so begin thinking now about how you will fund your adult care needs when the time comes, and who will provide that care. Whether you will to turn to family members or anticipate living in a continuing care retirement community (CCRC), it is best to educate yourself on the pros and cons of each long-term care option before you need the help.
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