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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.

8 comments

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  1. Janice Dee says:

    I have LTC and I would recommend this to friends and family all the time. I was a federal worker and purchased through the government at a very good rate when I was 44 years old and glad I did. A year later I was diagnosed with an autoimmune disease that may or may not cause disability and require either in-home or nursing home care at a later date. Had I waited, it would have been difficult to obtain the policy I have for $157 per month. I am now 58 years young and doing extremely well and part of it is knowing that should I need LTC, it is there for me. Just like all other insurances, you hope for the best but plan for the worst.

    As always, Suze looks out for us and and I recommend that you look closely at LTC to determine whether it’s a good fit for you. Best wishes to All!

    1. Phyllis Shelton says:

      Janice, how thoughtful of you to post this comment for all to see. My company actually did the employee education for the Federal government when the plan was launched in 2002. It was a monumental task with our team of 16 people doing 2,020 employee education meetings in 42 states, 210 cities. OPM (Office of Personnel Management) was committed to doing a stellar job of education to teach as many people in the Federal family (civilian, military and postal) how important it is to purchase long-term care insurance, especially at younger ages when we are healthier. Congratulations on not only being one of the thousands who listened and took action by enrolling, but is now passing it on as living proof of the value of acquiring LTC coverage at a young age. And yes, Suze carries the banner as well and is our voice today to keep this essential message going!

  2. Rosalinda Christensen says:

    I will be 60 in July but my husband and I are on a limited budget. I would like to have long term care insurance for me and my husband but I am worried about the added monthly cost it will add to our already strict budget. Ellen said on her question that the cost to her at 47 was $600+ twice a month. I know how important LTCi is but I am worried about the added expense. Both my husband and I are working full time and our health insurance that we are required to have is so very expensive. But I have seen how expensive it has been for our parents that did not plan for the future that the care and burial expense created a burden on us because the debt of caring for them until they passed on fell on our shoulders, including their burial costs.
    Thank you!

    1. Phyllis Shelton says:

      Hi Rosalinda – there may be a way we can help you. There are short-term care policies that aren’t as expensive yet can give you some meaningful coverage. Please do complete the questionnaire at https://www.gotltci.com/contact-us/ so we can see if you and your husband appear to be insurable. Please email Lawrence@ltcconsultants.com after you have completed it so he can take a quick look and see if a STC policy might be the answer for you.

  3. Ellen Blazucki says:

    I read Terry Savage’s column in Sun.
    I have LTC but husband does not. He’s 64 and has several health issues. Can he still get LTC. He’s afraid of costs. I got mine from JHU and pay $600+ twice a year.
    Thank you.

    1. Phyllis Shelton says:

      Hi Ellen, thanks for your question. We would have to find out more about your husband’s health issues but even if he is not insurable for traditional long-term care insurance, there is an annuity with long-term care benefits for which your husband could qualify. It would also protect the money you put into it from stock market losses while allowing it to grow if the market does well and provide him with a guaranteed lifetime income. If this is something that interests you, please email lawrence@ltcconsultants.com and he will reach out to you for a personal consultation with no obligation to buy anything.

  4. Lisa D Wilson says:

    I am47, looking for ltc jnsurance. Is it possible and advisable to combine life and ltc together. Trying to get a head of the game

    1. Phyllis Shelton says:

      Congratulations on taking the very important step to plan for LTC at age 47 Lisa! Yes it is possible to combine life and LTC together if that is in your best interest. I am here for people who don’t have a local professional who is skilled and knowledgeable in planning for long-term care. If you would like me to help you with this, please take a couple of minutes to complete the short questionnaire at https://www.gotltci.com/contact-us/. That gives me some basic information to work with to see how best to help you.

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