When it comes to retirement costs, many people underestimate the expense of long term care. It’s not just about meeting your housing and daily expenses in the years after you stop working. With people living longer lives, home care, adult day care, assisted living, and nursing home care are becoming more common, with the expenses growing year after year.
But exactly what kind of numbers are we talking about here? The average monthly cost of long-term care in the United States varies from about $1,500 for adult day care to $8,000 for a private nursing home room. Genworth, the source for those 2017 numbers, actually allows you to further refine your estimated monthly costs based on where you live. If you live in a high-cost area, you can compare costs across states or even cities. You can also adjust the results based on when you think you might need long-term care. Setting Genworth’s tool to 2047, for example, shows the national average for a private nursing home room climb to nearly $20,000 a month.
So, at up to $20,000 a month, who pays? Ultimately, clients can contemplate two funding strategies: the “retail” approach or the “wholesale” approach.
Taking the retail approach with Long Term Care
With the retail approach, clients wait until they need long-term care, then pay whatever is the going rate in the area where they live. In some areas, this number can exceed $250 a day, or $90,000 a year, depending on the care the client receives. And, as we’ve already seen with those Genworth numbers, these costs are only projected to rise over the coming decades.
Many people take the retail approach assuming that they won’t need long-term care, they’ll never go into a nursing home, or that their family or the government will help out. Of course, there are always “ifs” when it comes to long-term care, but the truth is, if you do end up needing long-term care, the associated costs can place a lot of stress on your family and your financial plan. (We talk a lot more about these “ifs” on our LTC myths page.)
Taking the wholesale approach with Long Term Care
There is, of course, an alternative to paying retail. With the wholesale approach, the client buys an insurance instrument allowing them to better leverage their dollars now and potentially get out ahead of the long-term care issue. Taking this approach helps protect your income, your financial plan, and your assets. There are also tax benefits associated with a long-term care plan, further complimenting the potential savings.
If you need help figuring out an approach that works for you and your financial plan, The Long Term Care Planning Group can help. Contact us today at 678.814.5088 or online.
Corey Rieck is the President and Founder of The Long Term Care Planning Group, a firm that specializes in delivering long-term care education and coverage to companies, high net worth individuals, and large organizations. Additionally, he has authored dozens of published industry articles on long term care and has assisted many of the nation’s leading LTC carriers on operational and educational matters.