PLANNING FOR THE LONG TERMSubmitted by Reby Advisors | Certified Financial Planners | Danbury, CT on February 6th, 2014
As the Baby Boomer generation reaches traditional retirement age, there is more to worry about than whether or not their money will provide for basic living expenses throughout their retirement years. Due to a number of factors, the reality is, Americans are living longer. A century ago, the average American lived to the ripe old age of 47 years. However, along with the passage of time, there has come a greater awareness of preventative lifestyle choices and major advances in healthcare; both resulting in the average life span rising to 77 years. ¹ Due to these factors, people must plan for a longer period of time spent in retirement. In addition to funding one’s retirement, we encourage our clients to mitigate the risks that can derail their retirement plans and deplete their retirement savings. One such risk, that is sometimes overlooked, is failing to plan for their long-term personal care needs. That way, when and if the need arises, they are not put in the position of having to deplete all of their savings on skilled nursing services. This situation can have unintended consequences leaving the partner, children, or other family members in a financial bind.
There are a number of options for people looking to plan for their long-term healthcare needs. This segment will focus on one of those options; Long-Term Care Insurance. As people reach their mid to late eighties, many will face challenges with the activities of daily living, also commonly referred to as ADLs. These activities include:
• Transferring (getting in and out of bed)
Long-Term Care Insurance is not a one size fits all solution. It is important to remember that the individual requiring care receive benefits in their home or at a healthcare facility; depending on the individual’s preferences and needs. There is no doubt that costs for Long-Term Care Insurance are high, and therefore, are not affordable to every family. However, addressing the potential need is still a necessary step in any well-thought out financial plan. Below is an outline illustrating the average cost that one can expect to pay for extended care services.
Home Care Providers:
• Certified Home Health Aides: $19.00 per hour
• Non-certified Homemaker services: $18.00 per hour
Assisted Living Facilities:
• Private one-bedroom unit: $3,450 per month or $41,500 per year
• Some charge a one-time community or entrance fee
• Private room: $83,950 per year
• Semi-private room: $75,555 per year (costs in urban areas are 12% higher than non-urban areas, on average)²
As you can see, the associated expenses can have a huge impact on one’s budget, especially if there is an unexpected and immediate need that arises for a member of a family. However, planning ahead for any eventuality is crucial and can help ease the financial burden that can accompany the already emotional experience of trying to find a caring environment for someone we love.
Our next blog will discuss four of the methods that are commonly used to pay for extended care.