Soaring Inflation and Rising Long-Term Health Care Costs Can Make Future Retirement More Complicated

Soaring inflation fueled by skyrocketing energy costs has started impacting the markets, and some economists suggest a recession may be ahead. Inflation and declining markets make it more challenging for those considering retiring in the next ten years. But inflation is not the only concern. Soaring long-term health care costs will make a considerable dent in income and lifestyle and could adversely change your legacy.

Inflation and higher long-term health care costs are complicating retirement planning. Planning for long-term care has never been more critical than now, as high cost and high risk can adversely affect family and finances.

The annual inflation rate for the United States is 7.7% for the 12 months ended October 2022 after rising 8.2% previously, according to U.S. Labor Department data published Nov. 10. This was up from 5.3% in August 2021. With consumer prices increasing, the stress on income, especially those who are retired or retiring soon, can start changing lifestyles.

Soaring LTC Costs Change Financial Dynamics

Long-term health care costs are also rising due to higher labor costs and labor shortages in some areas of the country. Markets have been up and down, with recession fears worrisome for investors.

Many people are so leery about inflation, long-term health care costs, and economic uncertainty that they are unsure how best to plan for their future retirements. The fear is that staggering long-term health care costs in the years and decades ahead can change the lifestyle of retirees.

The risk of needing long-term health care in the years ahead is not something to ignore. The risk of long-term care increases as you get older. While some people will never need care, about half of us who reach the age of 65 will need help with daily living activities or supervision due to memory loss.

Not Many Options

There are only a few ways to plan for the costs and burdens of aging. You either arrange for your adult children to become caregivers or pay for professional care. Neither option seems appealing to most people.

Health insurance (including Medicare and supplements) will pay up to 100 days of skilled services and nothing toward custodial long-term health care, which most people will require. Don't depend on Medicaid unless you have little or no income and assets.

Adult children are neither prepared nor trained to become caregivers for their parents. The ability to juggle jobs and families with the duties of being a caregiver is difficult, if not impossible, for most people. Plus, many care recipients have noted that they feel awkward having their daughter or daughter-in-law provide personal care like bathing and bathroom hygiene.

That leaves self-funding long-term health care costs or Long-Term Care Insurance. However, self-funding is costly and does not reduce the stress on your loved ones, and higher costs for long-term care services will take a bigger bite out of your income and assets. 

LTC Costs Vary Depending on Location

For example, according to the LTC NEWS Cost of Care Calculator, if you live in Las Vegas, Nevada, in-home care now costs over $4,600 a month (based on a 44-hour week). In 25 years, that cost will average over $9000 a month Nevada Long-Term Care Resources.

If you need assisted living, memory care, or nursing home care, that cost will be more, taking a bigger bite out of your financial resources.

Care costs do vary depending on where you live. Compare Vegas with Memphis, Tennessee. The exact amount of home health care in Memphis is averaging $3,852 today, and in 25 years, about $7500 a month Tennessee Long-Term Care Resources.

The LTC NEWS Cost of Care Calculator will help you plan by showing you the current and future cost of long-term health care services where you live. Plus, you will see state-specific information that will be helpful in your devising your retirement plans.

How would an additional bill of $4000 or more a month do to your budget today, much less the much higher costs of long-term health care services in the coming decades?

Your choices are to pay perhaps well over $100,000 a year for future long-term care, place the burden of caregiving on your family, or add a Long-Term Care Insurance policy to your retirement plan. 

A 55-year-old married couple in good health can find good coverage from $175 to $350 a month, depending on the actual benefits applied for, health, and other factors like inflation protection. Keep in mind that some insurance companies are much more expensive than others, with premiums varying over 100%.

Hybrid policies, which combine life insurance or an annuity with a qualified rider for long-term care, would be more costly but come with a death benefit. 

Ignoring LTC Risk Can Be Devastating 

Surveys have reported for years that people overestimate the cost of Long-Term Care Insurance and underestimate their risk of needing long-term care. Do you want to be dependent on your family? Would you feel comfortable spending large sums of money on professional care?

You may have planned well for your future (or current) retirement, but long-term health care costs will change everything. Just a small amount of in-home care will create financial pressure, not to mention the emotional burden on the rest of the family.

Affordable Long-Term Care Insurance offers you guarantees. You will have access to your choice of quality care options, including in-home care. Your loved ones will have the time to be family instead of being your caregiver. Plus, your assets will be preserved protecting your lifestyle and legacy. All the benefits are tax-free.

Being prepared for the consequences of aging will safeguard your assets and give your loved ones time to be family instead of caregivers. But remember, you cannot purchase a policy when you need care. You also have no clue when your health declines and your need for care will start. Nor do you know when the markets will drop. Trying to time everything just right is not possible.

States Taxing You When You Don't Own LTC Insurance?

Now there are 12 states considering following Washington's lead in taxing people who do not own a Long-Term Care Insurance policy - Multiple States Considering Implementing Long-Term Care Tax. 

Planning when you are younger will save you money, help secure your future retirement, and perhaps, get you out of a tax.

Retirement planning can be complicated. When you consider inflation and higher long-term health care costs, the consequences of ignoring the problem will change your lifestyle and that of your family.