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Plan for the future and the costs of care.
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It can be scary for today’s aging
to consider the future. The cost of
care, whether it be bringing in assistance at home, moving into an assisted
living facility or the health care costs of a nursing home, is overwhelmingly
expensive. Most everyone understands the
need to plan for retirement but few people really understand they need to plan
for the cost of long-term care.
There are many reasons people
avoid thinking about needing care in the future. It is natural for all of us to sidestep
dealing with difficult situations, especially when means having to picture
ourselves in a position of needing major health care or daily assistance. Yet the fact is that the majority of aging
citizens in the USA today will need long term care during their care years. Many Boomers are glossing over this fact and
not realistically factoring costs as they plan for the future. Here are some facts about health and long
term care costs:
Boomers believe saving $50,000 is enough
for health care needs during retirement.
Most Boomers believe Medicare will cover all their health care needs. Medicare does pay for health care. Most dual income couples turning 65 in 2020
can expect about $499,000 in Medicare benefits.
Yet that is not usually enough. The current estimates show that a couple
turning 65 today will pay, on average, an additional $220,000 out of pocket
medical expenses before they die. These
costs include premiums, co-pays and deductibles for medical care. In addition to the health care costs,
two-thirds of those over 65 will also pay about $50,000 per spouse for
long-term care needs, such as nursing home care, assisted living or
professional assistance at home.
Do the math. Putting
aside $50,000 for health care during the care years is just a drop in the
bucket compared to what could be needed.
The Employee Benefit Research Institute estimates that a couple who has
put aside $165,000 by the age of 65 will have a 50% chance of affording their
lifetime medical costs. Those who put
aside $225,000 have a 75% change of being able to cover their medical costs.
Right now the best scenario for Boomers turning 65 is
having $300,000 saved per couple to cover health care needs for the future.
According to the Census Bureau the median net worth of the average couple at 65
is nowhere near that.
Boomers believe that
Medicare will pay for
long-term support and services.
Medicare does not cover long-term support and service
costs. So costs for elderly housing,
long term nursing care, assisted living, or Caregiver support at home will be
out of pocket expenses.
Most Boomers fail to factor in how the costs of long-term
support can drain saved wealth. A long
stay in a nursing home, the need to move to an assisted living facility or the
long term use of home health aides can diminish savings very quickly. For instance, the average household wealth of
$120,000 can be reduced by half with just a six month stay in a nursing
home.
Most males over 65 will require about 2 years of long-term
supports and services and most females require 3 years during their lifetimes,
so these long term support and service costs are important to factor into
financial planning.
Boomers don’t believe they need
Long-Term
Care Insurance.
Again thinking they can rely on Medicare
and their health insurance, most Boomers try to avoid the additional expense of
another insurance policy. What isn’t
clearly understood is that Medicare long term benefits often only cover the
first 100 days of care, and in most cases the reason for the health care must
be serious enough to warrant a 3 day stay in the hospital before Medicare even
kicks in. Health insurance can also be
very limited as far as long term coverage.
Another common misconception is that if it all gets too
expensive the Boomer can just go on Medicaid.
Medicaid is an entitlement program and is only for people who have very
limited assets. To qualify for Medicaid
means spending down all assets to get to poverty level. Most Boomers don’t realize that owning a
house or car will completely disqualify them from this program.
The cost of care for today’s aging can be intimidating and
overwhelming. Careful and creative
financial planning can make long term care a bit less scary. Today’s Boomers need to actively start
looking into long term insurance as well as reassess their financial plans for
their retirement years.
Kate McCarthy is Director of
Operations for HomeAid Health Care which provides services for the elderly who
wish to remain safe and independent at home.
HomeAid is sister company to Prairie Home Assisted Living which has
served the physical, spiritual, mental and health needs of their residents
since 1999. Together the two companies provide
comprehensive care for the elderly in the Fox Valley area of Wisconsin.
Sources:
Why Baby
Boomers Need to Get Real About Health And Long-Term Care Costs in
Retirement. Howard Gleckman. Forbes.
5/22/13.
InShare. Jan
Zhdonova. 3/25/14.
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