Long Term Care on The Gulf Coast
Wow! Long term care can be expensive! But wait, it gets worse. Long term care (LTC) expenses are increasing faster than inflation,1 which means as our incomes are being outpaced by the cost to assist us in old age. Numerous families have shared with me that they are spring chickens and do not need to consider LTC at this point. However, pay close attention to the 2029 cost in the above table. You can see that in just ten years, the cost rises exponentially. I would be remiss if I didn’t share with you more details about these options, so that you can be prepared to choose one that best suits your family.
There are three main types of long term care:
Option A – Home Health Care – Home health care is usually the preferred option. No one wants to be forced to have to leave their own home. It is heartwarming to stay in the same environment, surrounded by family members. However, this may not be in theory for me any longer. I have helped families spend only $500 a month to get help taking care of mom and dad. On the other hand, I have helped families spend $12,000 out of their accounts to take care of mom and dad. How do you get to $12,000 a month? Pretty simply; caregivers commonly charge $15 – $21 per hour, which times 24 hours a day and 30 days in a month ranges from $10,800 to more than $15,000. You may want to draw a line in the sand ahead of time for when your family would like to transition to Assisted Living. For example, incontinence or the inability to bathe independently might be a benchmark indicating it is time to transition to professional assistance.
Option B – Assisted Living Facility (ALF) – An ALF should not be confused with a nursing home. These communities typically have a nurse onsite only for times when medical attention is necessary. Many families spend five to 10 years in an assisted living community. The average price for assisted living is $3,655 per month. Remember, that is for one person – not two. Medicare, Tricare and health insurance do not pay for assisted living facilities. ALFs are private, meaning funding must come out of your pocket to pay for this expense. Also, keep in mind that this is an average price. The range can be as low at $3,000 to as much as $9,000 a month for two people. It depends on the size of the apartment and the level of care needed. If you are potentially 5 to 10 years out from moving into a community, it’s a great idea to tour these facilities with family members and decide which family member you want to live near for added convenience.
Option C – Skilled Nursing Facility (SNF) –Typically an SNF provides a higher level of care and with residents needing immediate, 24-hour medical attention. The cost of care can be extremely high. Initially, Medicare will cover 10% of the first 20 days, then transition to a $176 per day copay, then ultimately you will transition to 100% private pay until nearly all your assets are gone. Medicaid can kick in once you have spent your assets down to only $2,000. If married, a spouse not needing care can retain up to $128,640. Be prepared to pay for these expenses either through income sources, assets and/or LTC insurance.
Option D – Early in my career, I used to let option D slide and not say much about people’s preference for option D. Families would tell me, “Andrew, our situation is different. Our daughter lives in the state of Washington and she promised us that she would retire early from Microsoft and move down to the Gulf Coast to take care of us. She promised us.” No kidding aside, we all know that this a joke. Not many people would uproot their family, quit their job, and take early retirement to move near and take care of their parents. Unless your children absolutely have to, would you want your child to do that? Would you want to set back your children’s family? No one ever plans to be a burden on their children, but it happens. Through early planning, it doesn’t have to happen to your family.
Fidelity says a 65-year-old couple retiring this year will need $285,000 for out-of-pocket medical expenses in their retirement2 If you are not prepared for that six-figure bill, then your retirement planning is incomplete. The best way to plan for long term care is to treat it like a fire alarm drill. Just like for a fire, we make sure we are ready for the real thing. Review your income sources, assets and long term care insurance policy, if you own one, and look at the numbers. Are you prepared? If not, then we need to talk about your plan to prepare for smoke rising.
Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM) and/or Swan Capital. AEWM and Swan Capital are not affiliated companies. Our firm is not affiliated with the U.S. government or the federal Medicare program. This information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. Life insurance policies are contracts between your client and an insurance company. Life insurance guarantees rely on the financial strength and claims-paying ability of the issuing insurer. Living benefits are available in the form of accelerated death benefits. These benefits are NOT a replacement for long term care (LTC) insurance. Living benefits and LTC riders are not available on all index universal life products and may not be available in all states. Addition of an accelerated death benefit or LTC rider may require an additional fee. Accelerated death benefits and LTC riders are subject to eligibility requirements. Life insurance policies are subject to medical underwriting, and in some cases, financial underwriting. Hypothetical examples have been provided for illustrative purposes only; they do not represent a real-life scenario and should not be construed as advice designed to meet the particular needs of an individuals’ situation. 00631497