The Harsh Reality of Long-Term Care Costs and Retirement Planning
Estate planning and retirement planning go hand-in-hand for most people because your estate will be comprised of the assets that remain after you pay for your retirement years. Of course there are some who have accumulated sufficient wealth to finance retirement living without reducing what is left for heirs, but these folks are in the minority. So when you are planning for your retirement it is important to get a good handle on the expenses that you may be facing later in life.
One thing to consider is just how long you can expect to live. The average lifespan is 78.4 years, but as you get older your likely lifespan increases. It seems illogical but statistics show that the longer you live, the longer your life expectancy becomes. For example, once a woman reaches the age of 65, her life expectancy is 85.5 years according to the Social Security Administration. In fact, the segment of the population age 85 years or older is the fastest-growing demographic subset in the United States. So if you are planning conservatively, you’ll need to be financially prepared to live into your mid-to-late 80’s and perhaps even beyond.
This leads to the subject of long-term care and the costs involved. According to United States Department of Health and Human Service, 75% of people who reach the age of 65 will need long-term care at some point in their lives. This includes in-home care as well as residence in a long-term care facility.
How much does long-term care cost? According to the MetLife Mature Market Institute survey the national average for a yearlong residence in an assisted living community in 2010 was just under $40,000. The latest annual survey published by Genworth Financial Services puts that cost at $38,220.00. Genworth pegs the annual cost of a semi-private room in a facility for skilled nursing care at $67,525, or $75,190 for a private room.
In the Greater Cincinnati area, I have personally seen clients pay from $84,000 to $120,000 a year for skilled nursing care in a facility. Staying in your own home and hiring around-the-clock skilled nursing care can run in the same cost range as living in a facility.
Whichever study you rely on in the final analysis, when you’re planning for your retirement years the odds are that the cost of assisted or skilled nursing will be a big budget item. Those who plan ahead for this need are the most successful in minimizing the impact on their personal wealth. The earlier in life you implement a plan, the better. But there is hope even for those approaching senior status, or for the elderly, to protect wealth from the costs of nursing care. To learn your options, consult a qualified elder law attorney at the earliest opportunity.