Long-Term Care Costs: No CPA Needed to See Financial Impact

When you were in high school pondering your future career, you likely considered many things. Would you go to college or trade school? What field would you study? Would you dive straight into the workforce? You might have thought about having a spouse, starting a family, and where you might live. However, you probably didn't think much about retirement and long-term care.

The distant future probably felt irrelevant compared to immediate choices and opportunities. Yet, as we grow older, these issues become more significant, impacting our future financial stability, quality of life, and peace of mind.

Now that you're over 40, you might imagine images of sunny getaways and leisurely pursuits, enjoying your future retirement with little worry or concern. The reality is that life is not a Hallmark movie. Don't get me wrong, you can enjoy your retirement, but you need to understand that there are issues you should plan for so your retirement plans can be less stressful for you and your loved ones.

Aging has consequences, and chronic health problems, mobility difficulties, dementia, and frailty can lead to long-term care needs.

Navigating the financial aspects of long-term care can feel overwhelming, but it doesn't have to be a complex maze. You don't need to take CPA prep courses to better plan for aging, retirement, and future long-term care.

You are Probably on Your Own

Once you reach age 65, you will likely need help with daily living activities, known as ADLs, or supervision due to a decline in your memory. If you think your health insurance or Medicare will pay for these costs, you would be wrong. These health insurance plans only pay for short-term skilled care, so they don't help at all for most long-term care services you will need in the future.  

If you think Medicaid is the solution, remember that Medicaid will only pay for long-term care services with Medicaid-approved providers once you have little or no resources available.  

The reality is that you will be responsible for paying for future long-term care services from your income, usually forcing you to sell off assets from your 401(k) or other accounts to pay for the care you will need. Since you are unable to time the markets or when you will need long-term care, self-funding is problematic and costly.

Understanding the Cost of Future Care

Yes, costly. A few decades ago, experts predicted a "silver tsunami" of an aging U.S. population that would require enormous resources for long-term care. Today, that silver tsunami is not only here, but it's also arriving in relentless tidal waves. The demand for long-term care services is growing exponentially, raising the cost of care services and highlighting your need for effective planning and resources to support the aging population.

After you understand that long-term care is a reality, understand how expensive future quality care will be. Long-term care costs are expensive today, varying significantly depending on your specific needs and where you live.

The LTC NEWS Cost of Care Calculator is a valuable resource that can provide personalized estimates for the cost of care not only today but also in the future. Nursing homes are generally the most expensive option but the least used, followed by assisted living facilities and in-home care.

Long-term care services rise over time due to increasing demand for care, inflation, and labor costs, so planning ahead ensures you're prepared for the care you will likely need, either at home or in a facility.

Hidden Costs of Unplanned Care

Without a long-term care plan in place, the burden often falls on loved ones. Family members stepping up as unpaid caregivers often face a hidden financial cost. Juggling work and caregiving responsibilities can lead to missed promotions, reduced work hours, or even job losses. The emotional toll of caregiving can compound this financial strain, leading to stress and potential health issues for loved ones.

Can you imagine your daughter or daughter-in-law providing very personal care for you in the future (like bathing, toileting, and personal hygiene?) Some of this care can also be physically demanding, not to mention emotionally difficult for both you and them.

Yola Rondinelli is a Connecticut insurance agent specializing in long-term care planning. She says your family may have no choice but to take care of you if you fail to plan, but it comes at a price.

Caregiving has a huge impact on spouses and children, with an emotional, physical and financial burden being placed on them.  They may have no choice but to care for their loved ones, because loved ones cannot afford to pay for the cost of care.  According to an AARP cost of caregiving study done in 2021, caregivers report average annual out-of-pocket expenses over $7,200 as a result of caregiving.

Rondinelli notes that some people assume their spouse or children will care for them when they need care.  However, this can present big financial, physical, and emotional challenges.

Grown children have their own families and jobs that they need to deal with, and just don't have the time or energy to deal with their parents at the same time.

You would probably rather your adult children and grandchildren have time to be family, not caregivers. Yet, this may become a reality and a family crisis without planning.

Challenges of Self-Funding

You might initially consider simply covering long-term care costs out of pocket. Self-funding future long-term care is costly, and you lose control since someone else will decide which accounts to drain and the types of care services you will receive.

With the increasing cost of long-term care services, even those with large nest eggs can feel the financial impact. Selling assets to pay for care not only means you will use your own money, but the tax impact will make the cost of care even more expensive.

For example, if you live in Pittsburgh, Pennsylvania, long-term care costs in 20 years will run over $10,000 a month for in-home care, more for assisted living, and over $18,000 a month if you require a nursing home. That would be a huge chunk of money for anyone.

Long-Term Care Insurance: A Wise Decision for Planning

Long-Term Care Insurance can be an easy and affordable solution. An LTC Insurance policy will provide guaranteed tax-free benefits to pay for the services you need in any setting, including at home.

With an LTC policy, you will have access to the care you need, want, and the quality care you deserve, giving your loved ones the time to remain family caregivers.

• Types Of Long-Term Care Insurance Policies - Which Is Best For You?

You might read stories that LTC Insurance is expensive, but those stories are wildly exaggerated when you review the facts. LTC NEWS reviewed the actual cost of Long-Term Care Insurance at various ages, and you can see for yourself: See Cost of Long-Term Care Insurance at Your Age.

Premiums are based on your age when you apply for coverage, the total benefits within the policy, your health, and other factors. The younger you are, the more affordable the premium; however, affordable options can be found depending on your health, even if you're in your 60s or older.

However, you should not delay because your health is the most important factor in your ability to obtain an offer. Both premiums and underwriting rules depend on the insurance company.

Long-Term Care Insurance premiums may be tax-deductible in some situations, and some states offer additional tax incentives. This not only protects your savings but also provides peace of mind. Partnership LTC Insurance policies take it a step further, offering additional dollar-for-dollar asset protection.

Benefits Beyond the Financial

The benefits of Long-Term Care Insurance extend beyond finances. It allows you to choose quality care services in your desired setting, including at home, ensuring you receive the care you deserve while maintaining your dignity and independence. For your loved ones, it allows them to focus on being family, not caregivers, creating a stronger support system for everyone involved and fostering a sense of peace of mind and well-being.

Taking control of your long-term care planning might seem something you can delay but your health can change without notice and premiums are most more affordable when you are younger.

The facts are clear. The need for long-term care workers is expected to soar in the coming years. The Bureau of Labor Statistics predicts a 42% increase in demand for caregivers over the next decade, which translates to 800,000 more home health aides and personal care attendants.

The result of all this means costs are increasing with demand, and the question is, are you prepared for the consequences of aging and future long-term care?

Adding to the challenge, many people, maybe even you, are unaware that Medicare, the government health insurance program for seniors, doesn't cover long-term care needs. It only offers limited coverage for short-term care. Medicaid, a program intended for low-income individuals, becomes the last resort for those who've exhausted their savings. According to the Kaiser Family Foundation, Medicaid shoulders about half of the $400 billion annual cost of long-term care in the United States.

You and your loved ones deserve access to quality long-term care services without burdening those you love or draining income and assets. Long-Term Care Insurance is an affordable way to address this problem, but you have to take steps now to add an LTC policy to your retirement plan.

Experts suggest seeking help from a qualified Long-Term Care Insurance specialist to match you with the best options. Your family will be thankful that you took care of this problem.