Life-Centered Financial Planning aims to give you the means to thrive during every stage of your retirement. Early on, that hopefully includes seeing the world, enjoying your favorite sports and hobbies, and making incredible memories with your loved ones.
In later years of retirement, a larger share of your resources will shift to giving you the comfort and care you deserve. An unexpected diagnosis or accident can also accelerate the need to focus more of your money on health care expenses that Medicare plans don't cover.
This overview of long-term care will give you a clearer picture of how to prepare your financial plan to support you when you may need it the most.
1. Defining Long-Term Care
The National Institute on Aging defines long-term care as "a variety of services designed to meet a person’s health or personal care needs when they can no longer perform everyday activities on their own."
Depending on the individual's needs these services can include:
In-home care: This can range from a few hours of help every week to full-time assistance with daily living and nursing.
Adult day care: Facilities where folks who can't take care of themselves stay during the day while their caregivers are at work.
Assisted living facilities: For people who need help with some everyday tasks but can still live with a degree of independence. The best living facilities try to foster a setting that feels like home while also creating a community and meeting health care needs.
Nursing homes: For people with chronic medical conditions who require a high level of professional care.
2. The Costs of Long-Term Care
According to the Administration for Community Living, today's 65-year-olds have a 70% chance of needing long-term care. On average, women need 3.7 years of care and men need 2.2.
Unfortunately, Medicare only covers 100 days in a skilled nursing facility, which typically means rehab from an injury or ailment.
The out-of-pocket costs for additional long-term care can be substantial.
A 2024 study by Genworth found that the national average for a private room in a nursing home is over $127,000 per year. An assisted living facility can cost upwards of $70,000 annually. And in-home care with a home health aide can be nearly $78,000 per year.
3. Paying for Long-Term Care
Folks who have family histories or ongoing ailments that point towards long-term care need to perform a cost-benefit analysis of their payment options, including:
Health Savings Account: If you have a high-deductible insurance plan and can't be claimed as a dependent on someone else's tax return, you can open an HSA and make tax-advantaged deposits. But you aren't allowed to open an HSA or contribute if you're already on Medicare.
Long-Term Care Insurance: Annual premiums typically start around $1000/year for a 55-year-old and rise based on age and the amount of coverage. Some more expensive plans also include an annual coverage increase tied to inflation.
Cash Savings: Depending on the amount of care you're anticipating, setting aside cash into an emergency savings bucket might be the most cost-effective and flexible option.
4. Long-Term Independence
Many healthy seniors might redefine "long-term care" as having the means to live independently for as long as they can. That could mean aging-in-place at the family home, relocating to a new city or state, or moving into a retirement community. Aging-in-place might seem like the most cost-effective option, but it's likely that an older home will require some repairs and comfort upgrades. Moving might affect your cost of living and Medicare coverage.
Health care and housing will be large line items on any senior's Life-Centered Financial Plan. Let’s meet to plan for financial challenges we can anticipate and goals you want to achieve.
