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Jan
22

What Does Long-Term Care Cost?

A lot, you’re thinking? Sometimes, yes.

Prudential released a study in 2011 that said “Americans tend to overestimate the costs associated with long-term care, which amplifies their level of concern about paying for it.” That’s a nice way to say we get the “deer in headlights” fear whenever we think about it, so it’s easier not to think about it.

Big mistake. Huge mistake.

How do you get rid of the monsters under your child’s bed? Mommy or Daddy flips the light on and look under the bed to prove there’s nothing there, of course.

So let’s shine the light on how much long-term care costs.

The cost of a home health aide to help with daily activities such as bathing, dressing, transferring from one place to another in our home and so forth ranges from $18-$27 an hour. Sitters and companions cost less.

Adult day care costs about $62 per day. If you watched the video on my home page about my client Mr. Duckett, you will know that he was able to continue his love of golfing three times a week by taking his precious wife Helen to adult day care while he golfed with his friends.

Assisted living averages a reasonable $3200 a month. These places are gorgeous! Some have the country club look and more importantly, spouses can stay together. You can have privacy in your own unit, or you can mingle with others. Someone is around to help you when you need it 24 hours a day with the daily activities or with the proverbial “I’m down, but I can’t get up” need.

Why do I say $3200 a month is reasonable? Compared to the cost of a nursing facility, it is. A semi-private room in a nursing facility according to the Prudential study averages $215 per day and a private room averages $247. Here’s an easier snapshot:

Home Health Aide: $18-$27/hr.
Adult Day Care: $62 per day
Assisted Living Facility:$3,200 per month
Semi-Private Nursing Facility:
– $215 per day, $6,500/month, $78,500/year
Private Nursing Facility:
– $247 per day, $7,500/month, $90,000/year

Now the cost of care varies greatly by geographical area so you will need to see what it is where you live. Here are links to four cost of care studies:

http://www.mutualofomaha.com/long-term-care-insurance/plan/cost-of-care.php

http://www.genworth.com/content/products/long_term_care/long_term_care/cost_of_care.html

https://www.metlife.com/mmi/research/2012-market-survey-long-term-care-costs.html#keyfindings

http://www.johnhancockltc.com/individual/map/JHLTC_CostofCare_v5.html

Numbers don’t mean much until you see how they are used. When one person needs care at $75,000 per year, $500,000 can easily be spent in less than four years.

YearAssets at Start of YearIncome NeedsLTC ExpenseInvestment YieldAssets at End of Year
1$500,000$60,000$75,000$20,000$385,000
2$385,000$61,800$78,800$15,400$259,800
3$259,800$63,700$82,700$10,400$123,800
4$123,800$65,600$86,700$5,000($23,700)
5($23,700) $67,500$91,200($0)($182,460)

Note: “Income Needs” is the portion of household income needs that the assets had been relied upon to provide and assumes annual inflation of 3%. “LTC Expense” is based on a typical annual cost and is subject to 5% annual inflation. “Investment Yield” is assumed at 4% annually after taxes.

Think using a 4% after tax investment yield is too pessimistic?  Here is the same chart using 6%.  Doesn’t look a whole lot better to me. You’re still out of money in less than five years.

YearAssets at Start of YearIncome NeedsLTC ExpenseInvestment YieldAssets at End of Year
1$500,000$60,000$75,000$30,000$395,000
2$395,000$61,800$78,800$23,700$278,000
3$278,000$63,700$82,700$16,700$148,500
4$148,500$65,600$86,700$8,900$5,000
5$5,000$67,500$91,200$300($153,400)

Don’t worry. This is just the first lesson in the cost of long-term care. In future articles, I’ll show you how people are finding resources not only to pay for care, but also to find people and organizations who will help them find caregivers. When you’re working full-time with a family, it’s very hard to find the hours it can take to find caregivers, schedule their time and keep everything going to make sure your loved one is safe.

Together, we’ll shine the light on these fears and make the monsters go away.

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