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Most people aren’t even thinking about it, but the numbers say that you should be. Ask yourself, “Am I saving enough to take care of myself so that I do not become a burden on my children or left dependent on the government?”. Long term care is one expense that can put your mind at ease.
While the costs to pay for long-term care can be daunting to think about, the earlier you start paying into a program the cheaper the rates will be. This article will help explain what long term care is, why it is important to think about your future needs, and tips on how you can prepare now.
Today, Millennials must constantly make difficult trade-off decisions. Our generation has to think about caring for our aging parents, paying for the needs of our children, and saving enough for our retirement.
According to the U.S. Department of Health and Human Services (HHS), around 70% of people turning age 65 will need long term care services at some point in their lives.
Why You Should Purchase Long Term Care: The Facts
As parents, the last thing you want to do is become a burden on your children.
According to a 2015 study by AARP and the National Alliance on Caregiving, around 43.5 million people in the US have provided unpaid care in the last 12 months. Typically, an unpaid caregiver is a family member.
On average, caregivers spend 20 hours a week giving care. In relative terms, that is a part-time job! Around 58% of those caregivers perform intensive personal care activities, such as bathing and feeding.
The average American life expectancy is 78 years. Moreover, the Population Reference Bureau projects that in 2060 nearly 100 million Americans will be 65 or older.
According to the CDC, if you reach the age of 80, you’ll likely live another 8-10 years.
By purchasing long term care, you can feel better knowing that you have taken the proper steps to ensure that your health will be cared for and that you will not run out of finances to do so.
So what is long term care?
Long Term Care:
Long term care is care that you need if you can no longer perform everyday tasks due to a chronic illness, injury, disability or the inevitable aging process.
We all age, and the statistics show that with modern medicine we are likely to live well into our 80’s. Long term care includes the supervision you might need due to common cognitive impairments such as Alzheimer’s or dementia.
Long term care is not intended to cure you. It is chronic care that you will need for the rest of your life. You can receive long term care in your own home, a nursing home, or an assisted living facility.
According to a Georgetown University study called, “Long-Term Care Financing Policy Options for the Future,” nearly 41% of long term care is provided to people under the age of 65.
This means that a large percentage of people who use long term care have not even reached the age of retirement!
How can this be?
Long term care assists those who need help taking care of themselves due to:
- Accidents (from a car crash or a sports injury)
- Diseases (such as multiple sclerosis and Parkinson’s)
- Disabling events (such as strokes, brain tumors, and spinal cord injuries)
- Disabling chronic conditions
- Developmental disabilities
- Severe mental illnesses
These are examples of injuries and ailments that can happen to anyone, at any age.
Recently, the National Council on Aging has found that 75% of seniors have at least one chronic health condition and that most have two or more. Conditions range from mild arthritis to advanced Alzheimer’s disease.
The National Investment Center (in their 2010 Investment Guide) cited that the average length of stay in an assisted living facility was 29 months.
The point is, it’s not a question of whether you are likely to need assisted care in your life… But will you be financially prepared for when it happens?
How Much Will You Need?
Below are some of the national average costs for long-term care in the United States (from 2016).
- $225 a day or $6,844 per month for a semi-private room in a nursing home
- $253 a day or $7,698 per month for a private room in a nursing home
- $119 a day or $3,628 per month for care in an assisted living facility (for a one-bedroom unit)
You can check the average costs for specific states here.
Daily health care is expensive, so properly planning for the future is critical.
- Can my retirement nest egg afford $80,000-$90,000 for 2.5 years?
- Can my children pay for this additional cost?
Why Waiting Doesn’t Pay:
According to the American Association for Long Term Care, the best time to apply is in your 40’s-50’s.
Note, the younger you apply the cheaper the rates. This is because insurers offer discounts to applicants who are in good health. These discounts are locked in, meaning that you won’t lose them if your health changes.
Government Assistance and Programs:
Relying on the government should never be your first choice. Due to strict standards, you may not end up qualifying for government assistance. You could get stuck in a position where you don’t have enough to adequately care for your health, yet make too much to qualify for government assistance.
Medicare does not pay for non-skilled assistance with Activities of Daily Living (which make up the majority of long-term care services).
Approximately 47 million seniors live in the United States, and the senior population will soon double.
What’s more, women are having fewer children. This means that there will be fewer working-age people to provide for each elderly person.
Social security, Medicaid, and Medicare are already strained as it is. With the aging population and low birth rate trends, there will be fewer dollars to go around.
The question is, do you want to leave your health care up to chance? Many people get stuck in the middle where they have too much income to qualify for benefits, but not enough income to pay for adequate assistance.
In sum, you must plan for your own future because relying on the government will leave you under cared for.
Here is a quick video that summarizes what we have talked about (provided by Life Happens).
The Take Away:
Different kinds of insurance help you have confidence in your future and mitigate the risk that is sure to come.
Putting money aside, automatically, through a workplace or individual insurance plan is one of the simplest ways to make sure you’re continuously adding to your nest egg. What may seem like a nagging expense now, may cost you more later.
Having the proper amounts of insurance and planning for your retirement are two key components of creating a financially secure future.
Interested in learning more about when a long term plan will kick in? The Increase Your Financial IQ Course will take a deeper dive into and explain more about how long term care plans work.
Additionally, this course will cover other wealth building strategies in more detail. For now, sign up for the FREE Increase Your Financial IQ Email Course for more information on financial planning and wealth creation!
Diversification is one of the most important aspects when deciding how to allocate your investment portfolio. Spreading out your risk amongst many different asset classes will help you weather the many inevitable storms to come. Your investment portfolio should include stocks, ETFs, fixed income assets, real estate, and other investment vehicles.
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