By Michael Donahoe
Taking some risks in life can be exciting, but there are certain things in life you don’t want to gamble with. When it comes to your retirement savings, how you raise your kids, or your health, for example, you want as little risk as possible. Some risks are obvious, but one risk you may not even be aware that you’re taking is neglecting to put a long-term care plan in place.
For some, the thought of sky-high bills and burdened family members motivates them to invest in some sort of long-term care insurance. Others just can’t seem to justify the hefty premiums—especially when the likelihood of needing long-term care seems so far off. Regardless of where you fall on this spectrum, let’s discuss 5 not-so-obvious factors to consider when it comes to long-term care (and the impact it could have on your nest egg later in life).
1. Most Of Us Will Need Long-Term Care At Some Point
About 7 out of 10 people will need some form of long-term care during their lifetimes. While the amount of time for which the average person will require help ranges, it is estimated that 69% of people will need care for 3 years. (1) Regardless of present health or circumstances, most of us will need some form of long-term care down the road.
2. Medicare Typically Doesn’t Pay For Long-Term Care
It may shock you to know that Medicare doesn’t cover typical long-term care expenses. Medicare is medical insurance. It covers acute care expenses like doctors’ visits, prescription drugs, hospital stays, and short stays in a skilled nursing facility in special circumstances. Medicare will not cover basic long-term care needs or facility costs. Basics such as assistance with daily personal care needs like bathing, feeding, getting dressed, and supervising are not covered by Medicare. (2)
3. It’s Challenging To Pay For Rising Long-Term Care Expenses Without Insurance
Long-term care costs are expensive. The average national monthly cost for an in-home health aide is $4,385, assisted living facilities cost $4,051 a month on average, while a private room in a skilled care facility will cost you around $8,517. (3) With costs this high, it’s no wonder that long-term care expenses often result in financial plan failures, even for those with resources. Over 32% of households with a $1 million net worth are materially impacted by long-term care costs. (4)
4. Long-Term Care Insurance Covers More Than You Think
Many people think long-term care insurance is only for traditional nursing homes or skilled care facilities. Most policies today cover much more. Home health aides, assisted living facilities, and retirement communities are often covered with today’s long-term care plans. Some plans include coverage for professional help should you need assistance with eating, showering, getting dressed, and using the bathroom.
5. Women Need Long-Term Care Insurance More Than Men
Women can expect to have higher long-term care costs than men simply because they tend to live longer. (5) When a husband is sick, for example, the wife often steps up to care for him until his passing. When the wife finds herself in the same situation years later, she typically doesn’t have a spouse to offer the same care. As a result, this burden falls on children or extended family members. Long-term care insurance can provide the resources needed to prevent being a burden and allow you to choose how, when, and where you receive care.
We Can Help You
Statistics show that most people will need some form of long-term care during their lifetimes, so even if you’re in tip-top shape today, it’s critical to put a plan in place to cover these potentially significant costs. When coupled with the need for an adequate retirement income, this task can seem daunting, but neglecting it is a risk you don’t want to take.
Remember that you don’t have to walk this journey alone. We know you already have plenty on your plate, so we at Harvest Asset Group are here to help relieve some of your burden. We can create retirement income strategies focused on reducing the chance that a long-term care stay will eat away at the retirement savings you’ve worked so hard to build. If you’d like to see how we can help, call us at (207) 775-1151 or email us at email@example.com.
Michael Donahoe is the founder and principal of Harvest Asset Group, LLC, an independent, fee-only financial planning and investment management advisory firm in Portland, Maine. Michael enjoyed a successful corporate career in marketing and sales before transitioning to the financial planning profession, founding his firm in 2012, where he now leads the client services team and serves as the firm’s chief compliance officer. Michael earned his MBA degree from George Washington University and completed his educational requirements to earn the CFP® mark of distinction at the University of California, Berkeley. He is a Fee-Only and NAPFA registered financial advisor, a designation which followed the completion of rigorous continuing education requirements. Michael has lived in the Portland area since relocating from San Francisco in 1995 to be closer to family. He is active in community affairs and spends his non-working time enjoying the natural beauty of Maine.