This post, of course, cannot answer the title’s question fully. But it can provide some food for thought.
Morningstar’s director of personal finance and author Christine Benz recently shared some important statistics about long-term care, noting, “If there’s a single unsolved problem in the retirement plans for many middle- and upper-middle-income adults, it’s what to do about long-term care costs later in life.”
Not only is the total amount spent on long-term care in the United States increasing (from $30 billion in 2000 to $225 billion in 2015), but also the number of people who will require it is growing.
While high-income, high-net-worth people may be able to self-fund long-term care costs, due to a myriad of factors, most people will rely on Medicaid-provided long-term care.
However, even people with significant financial assets might find themselves facing some tough choices if they are unable to fund a $300,000 (or more) long-term care outlay at the end of their lives.
Among the choices:
- Purchase traditional long-term care insurance. Initial cost and potential premium hikes are among the most common concerns.
- Purchase a hybrid long-term care product. Several options linking long-term care coverage with either life or health insurance are currently available. Overall cost and opportunity costs could be concerns, and consulting with a trusted advisor to determine the best course of action is recommended.
- Forego insurance and use non-portfolio assets, such as a home sale, to cover any long-term care costs.
To help with these decisions, here a few additional statistics you might consider:
- 52% of people turning age 65 will need some type of long-term care services in their lifetimes.
- On average, women will require 2.5 years of long-term care, while men will need 1.5 years.
- 14% of people will require long-term care for more than 5 years.
- 57.5% of people turning 65 between 2015 and 2019 will spend less than $25,000 on long-term care during their lifetimes.
- 15.2% of people turning 65 between 2015 and 2019 will spend more than $250,000 on long-term care during their lifetimes.
- $45,000: median annual cost for assisted-living facility, 2017 ($60,000 in the state of New Hampshire).
- $85,775: median annual nursing-home cost, 2017 ($120,000.00 in the state of New Hampshire).
Since no one is unable to look into a crystal ball to see what our long term care needs will be in the future, it is important to consult with your financial advisor and your elder law attorney now to discuss these issues and to ensure that your long term care plan is appropriate for your situation.