In a December 2012 article on Kiplinger.com titled A New Strategy for Paying for Long Term Care, author Kimberly Lankford presented interesting strategies to pay for retirees’ future long term care costs. The article explains how some financial planners are starting to recommend combining a long term care insurance policy along with dedicated savings to cover future care needs. The article says the average retiree needs to plan to spend $230,000 ($460,000 for a couple) to cover future care costs, which is determined by the current daily average cost of care multiplied by the average stay in long term care (which is 3 years).
I am not sure about you, but when I read the $230,000 number it definitely caught my attention! That amount of money could substantially deplete most people’s retirement savings. In my experience most retirees don’t have a plan for dealing with future care needs. Many people prefer to live in denial about the fact that they could end up needing assisted living or nursing home care. The fact is, according to a recent report from Health and Human Services, 70% of people aged 65 and over will need long-term care at some point in their life. What options are available when planning for long term care?
Relying On Children For Care
Perhaps your plan is to rely on your children to help if you ever need care. If that is your plan make sure your children are aware. Many retirees have no doubt seen that their kids are changing jobs more, moving more, both spouses are working (or perhaps never married in the first place) and having kids later. Taken together, these societal changes mean that it is difficult for adult children to care for their aging parents.
Some people hope to stay home and bring in care. This can work, but this plan comes with risks of its own. Don’t forget at the same time you are paying $20 an hour for care in your home, you still have to maintain your house, pay for food, taxes, utilities etc. – all those costs add up very quickly!
If you are expecting Medicare to pick up the tab for your long-term care, think again. Medicare will only pay for short-term recuperative care, not the type of long-term care that most people over 65 will need.
Long Term Care Insurance
Long term care insurance is considered a way to offset the $230,000 average long term care cost. Purchasing insurance is a good way to offset the financial liability of future care needs; however it does not fulfill one of the most crucial needs in a comprehensive plan for future care needs – where you will receive care if you need it. Having long term care insurance only means you will be able to pay for care, it does not assure you will receive quality care or even assure that you will receive care in a private room. Unfortunately most financial planners overlook this detail when helping their clients create a financial road map for their retirement.
Continuing Care Retirement Communities (CCRCs)
A time-tested solution to covering retiree’s long term care cost is the Continuing Care Retirement Community (CCRC). Residents of CCRCs don’t need to worry about where they will go for care if they need it as care is available on-site. CCRC residents also don’t need to worry about receiving poor quality care since CCRCs are known for providing a higher quality of care, and CCRC residents (and their families) have established relationships with the health care staff before they actually need care. Perhaps most important is the financial security enjoyed by residents of CCRCs. Those residents who move to a Virginia Baptist Homes community or another non-profit CCRC while they are still independent and pay the corresponding entrance fee are purchasing assurance that if they genuinely outlive their resources the CCRC will assist in paying for their care.
The financial security and peace of mind that comes with knowing there is a plan in place for your care are the main reasons new residents moving into Virginia Baptist Homes (VBH) CCRCs wish they would have made the move sooner. As costs for long term care continue to soar, more and more people will be seeking a refuge from those costs. The costs are not going to go down. You need to have a plan for your future care needs. If you think a CCRC might be a good fit, start looking sooner rather than later because once you begin to need care, your options will be limited and you may not qualify for independent living at a CCRC.
If you would like more information about a VBH community, please give us a call. Our counselors will be happy to explain how a CCRC can fit in to your future plans.
About the Author
Peter Robinson serves as the Vice President of Marketing and Public Relations for Virginia Baptist Homes. He is a graduate of James Madison University with a B.A. in History and also is a graduate of George Mason University with a M.S. in Health Systems Management.