Preparing for Long Term Care Costs

By Edward Jones for use by your local Edward Jones Financial Advisor, Paul Harrison
Like everyone else, you hope to remain physically and financially independent your entire life. And you may well achieve this goal. Nonetheless, the future is not ours to see, so you’ll want to prepare yourself for as many contingencies as possible, one of which is the high cost of long-term care.
As you may know, long-term care primarily refers to nursing home expenses, but it also includes services provided in your own home. In either case, though, it could be expensive.
The national average rate for a private room in a nursing home was more than $87,000 per year in 2011, according to the 2011 MetLife Market Survey of Long-Term Care Costs. The same survey found that the average private-pay hourly rates for home health aides and homemaker companion services were $21 and $19, respectively.
With luck, of course, you won’t need to worry about these types of expenses. But consider this: People who reach age 65 have a 40% chance of entering a nursing home, according to a study by the U.S. Department of Health and Human Services. And about 10% of those who enter a nursing home will stay there five or more years.
Clearly, if you take no steps to prepare yourself for the potentially devastating costs of an extended nursing home stay, you could be jeopardizing the assets you’ve worked so hard to accumulate. Even worse, if you run through your money, you might end up creating a financial and emotional burden for your grown children.
Unfortunately, many people assume that a federal or state government program will help them pay for their long-term care expenses; however, Medicare pays only a small portion of nursing home costs. To be eligible for Medicaid, you would likely have to divest yourself of most of your financial assets. Consequently, you’ll probably need to find another way to pay for long-term care.
Fortunately, there are investment or protection vehicles designed specifically to help you meet long-term care expenses. Your financial advisor can help you pick the option that’s most appropriate for your individual situation.
Having the ability to pay for long-term care is obviously important, but other issues may also enter the picture. For example, if you need to enter a nursing home, you may be suffering from a physical or mental disability that might prevent you from handling your own affairs. This impairment could prove disastrous to your finances which is why you can’t afford to take that type of chance. Instead, consult with your legal advisor to determine if you can benefit from a durable power of attorney; a document that lets you delegate your financial decisions to a relative, close friend or anyone else you might choose.
None of us like to think about spending time in a nursing home or needing round-the-clock care in our own homes. However, life is unpredictable. But even if you can’t avoid the need for long-term care, you can take steps to help reduce the financial strain it can cause you and your family.