Beware the Oncoming Long Term Care Tsunami

  • Unfortunately, many individuals make the mistake of waiting too long to plan for long-term care.
  • 70% of people age 65 and older will need some form of long-term care in the next few years.
  • When you visit long-term care providers, make sure to ask about the cost of care, if they accept long-term care insurance and assistance from government programs.

America’s healthcare system is going through huge changes in preparation for the growing medical demands of the Baby Boomer generation. Over the next three decades, the United States will see unprecedented growth in its senior population as the Baby Boomer generation (born between 1946-1964) ages. Increases in healthcare demands will be seen throughout the healthcare industry, with the greatest impacts anticipated in hospitals, skilled nursing, assisted living, and residential care facilities.

Many Americans don’t want to think about the day they can no longer live independently and take care of themselves. But the truth is, 70% of Americans 65 and above will probably require some form of long-term care due to old age, illness, injury or accident.

Unfortunately, many individuals make the mistake of waiting too long to plan for long-term care. Sometimes it’s too late and they already need long-term care.

So, when is the best time for long-term care planning?

The short answer is: right now.

Long term care expenses in the United States are high, and delaying having a good plan could significantly affect your finances. There might come a time where you can no longer be able to carry out some of your daily living activities, so taking the necessary measures to ensure that you get the best long-term care to meet your needs is the best proactive step.

What makes matters more troubling is that family members also find themselves at risk physically and financially after they take the responsibility of taking care of aging parents.

To help you get started planning for long-term care, let’s first look at the most common misunderstandings about Long Term Care.

1) “I am healthy. I won’t need long term care.”

70% of people age 65 and older will need some form of long-term care in the next few years.

Long term care refers to the services and support that an individual might need to maintain his or her quality of life in the event of illness, disability, or sudden impairment. This type of LTC covers the assistance in completing the Activities of Daily Living or ADL. These tasks include the following:

  • Eating
  • Bathing
  • Dressing
  • Toileting
  • Continence
  • Transferring

While the definition of long-term care might lead some people to think that it is the same as medical care, these two are different. On one hand, medical care concentrates on treating the illness in order to improve health. On the other hand, LTC focuses more on maintaining the person’s functionality and routine.

Those in the Sandwich Generation are caught between caring for their parents, caring for their children and at the same time, trying to hold onto their careers and jobs.

2) “My savings are enough to cover any form of care that I might need.”

Currently, Americans between the ages of 55 and 64 have an estimated $104,000 in their savings accounts. While this might sound substantial to many, it is not nearly enough to cover the average cost of long-term care in the country, especially when many individuals end up needing care for years.

3) “I can postpone planning. I have time and I am still young.”

Long-term care is not just the concern of the elderly. Nearly 41% of long term care recipients are people under the age of 65. These are the ones requiring assistance because of illnesses, injuries, disabling conditions, or accidents.

4) “Medicaid/Medicare will cover my long term care needs.”

Medicare does not pay the largest part of long term care services, which include personal care and custodial care. On the other hand, Medicaid does pay for custodial care and medical care, but only for people with low income and no assets. But, long-term care insurance can give you comprehensive coverage.

Family caregivers sacrifice financially, physically, emotionally, and mentally.

5) “My health insurance covers long term care.”

In general, health insurance covers only very limited and specific types of long term care – even less than Medicare.

6) “My family will take care of me.”

By relying on your family for the care that you need, you put them at risk financially, physically, emotionally, and mentally.

7) “Long term care means going to a nursing home.”

Long term care does not necessarily equate to moving to a nursing home. Depending on the level of care that you need, you can choose to receive care in your own home like 43% of individuals who chose this option. There are also other options such as adult day care and assisted living facilities.

8) “Some illnesses are incurable. Preparing for them is a waste of resources and time.”

Incurable diseases, such as Alzheimer’s and Parkinson’s, require more careful planning because these involve loss of executive functions. These diseases often take time to progress. You will need to take specific measures to make sure that your wishes are carried out when you can no longer decide for yourself.

As of late 2010, the U.S. had an estimated 72,000 centenarians, according to the Census Bureau. By the year 2050, that number — with the aging of the baby-boom generation — is expected to reach more than 600,000.

9) “It is too late to plan. I am retiring soon.”

Average life expectancy in the U.S. did not reach 65 until 50 years ago. But now, the average life expectancy of Americans is at 79.9 years. Life during those years could be comfortable with sufficient planning.

Gather Some Realistic Long-Term Care Cost Data to Plan for Long-Term Care Costs

The cost of long-term care depends on the type of care and services you need and the state where you live. When you visit long-term care providers, make sure to ask about the cost of care, if they accept long-term care insurance and assistance from government programs. But first, you need to learn about the current cost of long-term care.

The average annual cost of a private room in a nursing home is $100,379 while the average annual cost of a semi-private room is $88,348.

Additional Options to Fund Future LTC Services

A financial professional can present the following (and more) financial instruments that will fund LTC future costs to whatever target amounts and year(s) you select. These options include:

  • Long-term care insurance that offers traditional coverage for long-term care needs
  • New-generation life insurance policies with living benefits
  • Asset based long-term care policies that can provide tax-free benefits
  • Annuities with Long Term Care Riders

With these, you are comparing:

  • Paying LTC insurance premiums today for guaranteed payouts in the future;

vs,

  • Investing those LTC premiums yourself (self-insuring) with the hope that this strategy will perform financially at least as well over time as the LTC insurance

This is a complicated calculation that involves your tolerance for economic risk (stock market volatility) and many other factors.

Developing Your Long-Term Care Strategy

A licensed financial professional has the knowledge and experience to talk you though this. They can help you apply sound decision-making principles to your unique set of conditions.

Just remember, this guideline can help you weather the storm and possibly bring you more peace of mind. Keep your spending in retirement equal to or less than what you earn every year of retirement; always reinvest the annual surplus; and you and your partner will be fine.

Jennifer Lang Financial Services is an Independent Agent and  closely monitors the most competitive life insurance carrier rates to help you get the best possible fixed index annuity. Get in touch with us to get a financial plan design that works best for your specific circumstances.

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Jennifer L

Jennifer L is an author, a public speaker, a retirement protection specialist and host of Independent Wealth Planner Strategies.
https://www.jenniferlangfinancialservices.com/

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