Include the Cost of Long-term Care in Your Retirement Plan

Our retirement dreams might include travel, hobbies, spending more time with family, and having time for all those other things we’ve always wanted to do. So we carefully budget for our basic expenses, as well as all those nice extras. And the earlier we start saving, the better.

But studies show many people forget to factor in a significant expense they’re likely to encounter after retirement: the cost of health care. Neglecting this piece of the retirement financial planning puzzle could really throw your plan off track.

Hospital stays and doctor care are the first things that come to mind. Whether we experience sudden illnesses or injuries, or chronic health conditions, these costs can really add up, even if a person is on Medicare or another insurance.

But it’s important to look at “health care” in the broader sense. Not all care is medical in nature. If you were to have a disability—and that’s more likely the older you get—you might need assistance with the “activities of daily living”:

• Personal care, such as bathing, dressing and using the bathroom.
• Keeping the home safe and clean.
• Preparing nutritious meals.
• Transportation to health appointments and elsewhere.
• Staying socially active.
• Following the doctor’s orders.

According to a January 2021 report from the U.S. Department of Health and Human Services (HHS), most Americans underestimate their personal risk of developing a disability and their likelihood of needing help with the activities of daily living. HHS projects that 56% of Americans turning 65 today will need the types of support listed above—for three years, on average, but sometimes for a much longer time. Government assistance may be available for some people and some costs, but people turning 65 today are advised to set aside close to $150,000 just for out-of-pocket care costs they’re likely to incur.

Things to consider as you plan for the cost of care

What might you expect? Start with a realistic vision of your later years. How’s your health now? Are there lifestyle changes you can make to lower your risk of disability and the related costs? Don’t bank on remaining healthy, though. We can’t predict the future, and the longer we live, the higher our costs are likely to be.

Where might you receive care? Today, there are many options. If your care needs are complex, long-term care provided in a nursing home might be best. Assisted living communities provide varying levels of help with the activities of daily living. In a continuing care retirement community, residents receive an increasing level of care as their needs change. None of these options are inexpensive—and many people who have not done their homework are in for a rude awakening when they discover that only medically necessary care is covered by Medicare. (Medicaid and other programs may cover some costs for people with low income.)

Could care support help you stay home?

More than 75% of people say they would prefer to receive care in their own homes if possible. And with the right help, it often is possible! However, this choice can put a large burden on our families. Today, millions of spouses, adult children and other family members are providing care for older loved ones and those living with disabilities. This unpaid care is valued at billions of dollars.

But “my kids will take care of me” really isn’t a good plan. Families are smaller today, and adult children are likely to live at a distance from older parents, which equals fewer people who can help. Adult children likely have full-time jobs and other family responsibilities, as well.

“But I don’t want to hire professional care,” some older adults protest. “I want to leave my children a nice inheritance!” In fact, by bringing in supplemental care, these caring parents would be doing their adult children a big favor. Studies show the careers of family caregivers can be seriously impacted when they must come in late or leave early, take care-related phone calls during the day, turn down travel or promotions, and even quit their jobs. Their own health can be affected and their own retirement plans derailed. Family members also stand to spend a lot of their own money on care services when their elder loved one hasn’t saved enough.

Home support services are available

Fortunately, if you’ve saved for your care, you’ll have a lot of options to help you “age in place” when the time comes, if that’s your choice.

Home modifications make the home better suited for your needs. These range from minor fixes, such as extra handrails on the stairs, to a major remodel for one-story living and a wheelchair-accessible kitchen and bathroom. This is something to consider early on, and to include in your budget projections.

Government-provided senior services are available, such as senior centers, meal programs, senior transportation, adult day centers and case management. Some are free, while others are available on a sliding scale.

Home health care providers offer many of the services provided in a skilled nursing facility, such as injections, medication administration, wound care and rehabilitation services. These medically necessary services may be covered by Medicare and other insurance.

Professional in-home caregivers assist senior clients with the activities of daily living listed above. This care helps clients maintain their independence and normalizes relationships with adult children—something most of us would want. These services are generally not covered by Medicare, though some Medicare Advantage plans recently began providing some coverage. This care also may be paid for by the Veterans Administration.

Who can help you make your plan?

As you can see, financial care planning can be complicated, and the long-term care landscape is complex. Call in experts to help. An aging life care professional (geriatric care manager) can help locate support services in the area, and work with families on care planning and equitable payment solutions. Elder law attorneys help with estate planning, powers of attorney and other legal matters.

A financial planner or other financial adviser can help at every step, letting you know if you’re on track with your retirement savings goal; advising you on maximizing public benefits; and helping you navigate Medicare, financial issues for your spouse and family, your Social Security strategy, and the topic of “spending down” to qualify for Medicaid.

These professionals also offer advice on alternative ways of paying for care, such as home equity loans, reverse mortgages, long-term care insurance, and life insurance with long-term care riders. These are good options for some people—but it’s very important to choose a product or policy carefully. And choose your financial planner carefully, as well. Ask about their credentials, licensing, familiarity with senior care issues, and fee structure.

Begin planning early and revisit your plan often. Just as you wouldn’t make health decisions without the input of your doctor, it’s risky to make your financial plan without consulting experts.

Right at Home caregivers are screened, supervised and trained to meet all the care needs of clients, and support for families. Find your local Right at Home and ask for a care consultation today.