We’ve got good news and bad news. First, the good news: People are living longer than they have in previous generations. An adult male turning 65 this year can expect to live, on average, until age 84.3.1 Now, the bad news: All of those extra years may not necessarily be healthy ones. According to the U.S. Department of Health & Human Services (HHS), “70% of seniors 65 and over will need long term care in their lifetime.” 2
What is long term care?
Long term care is not medical care but personal care assistance with the activities of daily living (ADLs) such as dressing, bathing, toileting, eating, and transferring in/out of a bed, chair, or car due to a debilitating illness or injury. Some services also help with everyday tasks such as housecleaning, preparing meals, running errands, caring for pets, taking medication, and monitoring glucose levels. The care helps people maintain a quality of life when they can no longer take care of themselves.
So where will that help come from when someone needs it: family members, hired professionals, or a combination of both?
In sickness and in health?
A recently published survey3 shows that Americans are not realistic in their planning for long term care:
47% expect their spouse or partner to help
26% expect their children to assume the role
69% have not discussed the issue with their family
Journey of the family member caregiver
To provide some insight on what it means to rely on a spouse or other family member for long term care, it helps to look at the caregiver journey and the sacrifices someone needs to make in terms of time, finances, and emotional investment to care for a family member.
In a scenario developed by the AgingWell Hub4 , an adult daughter who is married with two pre-teen daughters and a full-time job is suddenly faced with caring for a mother with Alzheimer’s. The scenario illustrates the progressive decline of a caregiver’s lifestyle and well-being as the demands of care for a family member increase.
In her journey, the caregiver’s marriage and relationship with her daughters become strained as she spends more and more time away from the family to care for her mother. She is reprimanded at work for coming in late and missing days to provide care. The family finances suffer when she is forced to reduce her employment to part-time work to create more time for caregiving.
The caregiver herself also begins to suffer as she stops doing things that bring joy, health benefits, socialization, and stress reduction to her life such as exercise and participating in a book club. Her stress level is pushed as she struggles to balance her own life with providing care and financial support when her mother’s decline requires in-home care workers — and eventually, the need for placement in a nursing home.
Not only does long term care for a family member take its toll on a caregiver’s emotional and physical well-being, it also impacts their finances. About 44 million Americans provide 37 billion hours of unpaid, "informal" care each year.5 Caregivers who do not provide assistance with medical or nursing tasks spend an average of $4,558 for out-of-pocket expenses, while long distance caregivers (those living more than one hour away) spend even more with an average of $11,923.6
What is the cost of long term care?
Counting on a spouse or family member to provide long term care is a big ask and not always feasible if those family members are unable or unwilling to provide the time, energy, and funds it takes to fill the role. So that leaves hiring help. What exactly does that look like in terms of cost?
Long term care is a stunningly costly expense. To wrap your head around the price tag, according to Genworth Financial’s 2017 Cost of Care Survey. 7 “the average assisted living facility in the U.S. costs $3,750 per month, or $45,000 per year. The average nursing home costs $235 per day, or $85,775 per year, for a semi-private room. Want your own room? It'll set you back $267 per day, or $97,455 per year.”
How to cover the cost
Having the money to pay for the cost of long term care may sound like an overwhelming task, but it can be done. The earlier you begin to factor it into your financial strategy, the more likely you will be covered when you need it. Here are some considerations:
Long term care insurance
This product covers care not covered by health insurance, Medicare, or Medicaid. It reimburses policyholders a daily amount (up to a pre-selected limit) for services such as caregivers who assist with activities of daily living. Premiums for long term care insurance can vary widely depending on your age when you buy the policy, the maximum amount the policy will pay per day, and the maximum number of days or years that the policy will cover you. Most policies require medical underwriting. If you are in poor health, over a certain age, or already receiving long term care services, you may not qualify.
Other financial products
Due to the growing elderly population and demand, some life insurance and annuity products now come with long term care benefits. Again, the policies have requirements to qualify and can have high premiums, which may make them out of reach for some.
Health Savings Accounts (HSAs)
These accounts offer tax-free contributions and withdrawals to cover medical expenses. Whether you have an HSA through an employer or on your own, it can provide a big help in covering long term care. Premiums for long term care insurance, services provided, and medical equipment needed for long term care can be paid with HSA savings.
Retirement income, savings, and investments are what most people have to cover the cost. This includes Social Security, pensions, 401(k) plans, IRAs/Roths stocks, bonds, and the selling of material assets such as a car and house. This is where a financial strategy is critical. Work with a financial professional to determine how much you may need to cover caregiver costs if you don’t have long term care insurance.
We can’t stress enough that the best medical bill is the one you never receive. Keeping yourself physically and mentally strong can have benefits that can last into those extra years of longevity and stave off the need for long term care. Forming healthy eating and exercise habits are essential to good health. And don’t forget your brain, it’s a muscle as well and needs to work out. Reading, working, games and crossword puzzles will help keep you mentally sharp.
The long run
While it is likely that everyone will need a little care down the road, it doesn’t have to be a family or financial burden if it’s faced early on. Thinking about it now will save stress, strain, and worry later.
Things to Consider:
- Do family members have the time, energy, and funds to perform caregiver duties?
- Is long term care insurance or another financial product a good option for you?
- Does your financial strategy include the cost of caregiving if you need it?
1 “Benefits Planner/Life Expectancy,” Social Security Administration, accessed October, 2018.
2 “Caregiver Resources & Long-Term Care” HHS.gov, July 2017
3 “Long-Term Care Needs Not Included in Future Financial Plans for Many,” Plansponsor.com, March, 2018
4 “Caregiver Journey Map,” AgingWell Hub, 2018
5 “Caregiving,” Family Caregiver Alliance, accessed October, 2018
6 “The State of Caregiving 2018,” Caregivers Homes, March 2018
7 “Cost of Care,” Genworth Financial, 2017
Neither Transamerica nor its agents or representatives may provide tax or legal advice. Anyone to whom this material is promoted, marketed, or recommended should consult with and rely on their own independent tax and legal advisors regarding their particular situation and the concepts presented herein.