Understanding The Cost Of Long Term Care (LTC)

There is an extended care wave coming. Legislators see the writing on the wall, hence all the talk about our aging population and how to pay for their long term care. The state of Washington recently passed a law mandating Long Term Care (LTC) insurance for all Washingtonians. Many other states are working on solutions to the impending wave.

Many people take a wait and see approach when it comes to the topic of extended care, not wanting to think about the possibility of needing LTC and how to pay for it. Some assume they can’t afford a LTC insurance policy, leaving things to chance or relying on their children to take care of them if and when the time comes. All too often many Americans believe that Medicare will pay for extended care, a belief that is incorrect, and potentially costly. It is possible that Medicaid will pay for extended care, but not until savings spend down occurs and Medicaid estate recovery is in place.

Even those that have planned for retirement rarely plan for the possibility of needing long term care. The best retirement plan can be literally wiped out by not planning for extended care. The average duration for care is 4.4 years for those needing care longer than a year. The average duration is 2.5 years. Those with Alzheimer’s require care an average of 4-8 years, though some as long as 20 years.

The average monthly cost of care in an assisted living facility (private/one bedroom) is $4500 in 2022, $6000 a month in an upscale facility. Nursing home (semi-private) is $8000 a month, $9000 for a private room. Projecting out 25 years, the $4500 room will cost $15,000 a month, and the $8000 a month semi- private nursing home room will be $27,000 per month (5% compound inflation.)

Questions To Ponder:

Where do you plan to retire? Cost of extended care can vary dramatically by region. What impact will extended care have on your income? What impact will extended chronic care have on your assets? What type of extended care do you prefer… home care, assisted living, high-end country club assisted living? What LTC insurance can you afford over the long term? Many long term care policies waive premiums when receiving benefits, and others guarantee level premiums. Choosing a Long Term Care policy today that fits your needs tomorrow is sound financial planning.