Death and taxes: two inevitable truths. And according to a recent survey conducted by Bankers Life and Casualty Company Center, a good majority of pre-retirees have planned, or at least, have begun planning for their inevitable demise. Taking that financial step to ensure your heirs and loved ones are taken care of is an important one. But there was a gaping hole in the retirement plans of the middle-income Americans surveyed: almost two thirds of them had no plan to address any long term care they might need during their retirement.
On average, 70% of people turning 65 can expect to use some form of long term care during their lives. On average, 8% of people between 40 and 50 years old have a disability that could require long term care services. Women, especially, should look into some kind of long term care coverage as they live an average of five years longer than men and are more likely to live at home by themselves during their later years.
The Bankers Life survey indicated that middle-income baby boomers found it difficult to talk to their spouses about what their preferences are when the time came for some kind of extended care or even on how they would pay for care. There are plenty of misconceptions out there on the importance of long term care and Medicare coverage. Two-thirds of those surveyed didn’t think they would ever use long term care. Most baby boomers greatly underestimated the average yearly cost of nursing home or long term care. The respondents of the survey thought the average yearly cost was $47,000 but the actual cost is over $91,000. Home health aides help people who are disabled, chronically ill in the patient’s home. Home health aides make, on average, $19 an hour. If you were to require 24 hour care for 30 days, it would cost $13,680. For three months, that would cost $41,040. That kind of cost could wipe out your retirement nest egg at break-neck speed.
Another misconception is that Medicare will help pay for long term care. Medicare does not pay the largest part of long-term care services or personal care—such as help with bathing, or for supervision often called custodial care. Medicare will help pay for a short stay in a skilled nursing facility, for hospice care, or for home health care if you meet certain conditions. Medicare does not pay for non-skilled assistance with Activities of Daily Living (ADL), which make up the majority of long-term care services. You are financially responsible for long-term care services that are not covered by a public or private insurance program.
No one really wants to think about getting older and needing this type of care, but it’s an important discussion to have. You have worked hard building your retirement funds and long term care should just be another piece of your retirement planning that should be covered.