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Long-Term Care Costs Only to Go Up

It’s no secret that the price of long-term care insurance is high. It’s high for everyone, not only the patients, but also the caregivers. They pay in more than money to make sure their loved ones in need of care, are given the best they can manage.

ThinkAdvisor’s recent article, “15 Most Expensive States for Long-Term Care: 2017,” says that this year’s version of Genworth Financial’s annual study on the cost of care nationwide is not reassuring. The cost of nursing home care is on the rise, as well as the cost of care provided at home, for adult day care and assisted living facilities. Costs have increased steadily, and for those licensed homemakers—those who provide what the study calls “hands-on personal care” for patients still in their homes—are jumping the fastest, increasing 6.17% in the past year. With most seniors wanting to stay in their homes, that will impact many people very hard.

Overcoming-2127669_640Less-skilled “homemaker care,” such as cooking, cleaning and running errands has also risen, at 4.75% since last year. However, both types of homemaker assistance are at the low end on the price scale: $21 for homemaker care, and $22 for licensed homemaker care.

Elsewhere, adult day care increased by 2.94% since last year, to a national median rate of $70 per day. Assisted living facilities now average a median monthly rate of $3,750, which is an increase of 3.36% from last year, and nursing homes increased 5.50% for a private room. That’s a median daily rate of $267.

When caregivers sacrifice their own financial well-being to care for their family members, they can spend on average of $10,000 out of their own pockets for expenses. This can be for household expenses, personal items or transportation services, as well as paying for informal caregivers or LTC facilities.

Approximately 62% of caregivers are paying for these expenses out of their own retirement funds, and 45% have experienced a drop in their basic quality of living because of it. In addition, 38% have decreased the amount they put into savings and retirement to meet the costs of care.

Another side effect of all this stress, is that 27% of respondents said it’s had a negative impact on their relationship with the person for whom they’re caring. The price of all this devotion is that absences, reduced hours, and chronic tardiness can end up impacting a caregiver’s pay, with about 50% of caregivers saying they lost a third of their income.

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Jeffrey Bellomo, Esq.

 

Reference: ThinkAdvisor (October 2, 2017) “15 Most Expensive States for Long-Term Care: 2017”

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What’s the Big Deal About Long-Term Care?

Many seniors don’t feel that long-term care (LTC) insurance is a viable option. They think it’s expensive and is often just protection against the cost of nursing home care.

But that could change. If the long-term care insurance industry focuses more on helping people cover home-based services, policies would be more affordable and more appealing, says Kaiser Health News in its recent article, “How To Get Long-Term Care At Home Without Busting The Bank. Most people see long-term care as a home care problem, and they can see a benefit to insuring people for the likelihood of where care is going to be needed first: at home.

Hands-216982_640However, people are using home care, and a smaller percentage are using nursing home care. People think they may begin needing care at home but eventually will need care in a facility. Research shows that is not true. People are usually able to stay at home for the entire time.

There are currently more than 6 million older Americans who have a “high need” for long-term care, according to the U.S. Department of Health and Human Services. That’s defined as requiring daily assistance with at least two activities (eating, bathing, toileting, dressing, continence or transferring from a bed to a chair) that lasts at least 90 days or a need for substantial assistance due to severe cognitive impairment.

It’s estimated that about 52% of adults reaching age 65 today will need these services, with half needing it for two years or less, 12% for two to four years, and 14% for more than five years. However, fewer than 10% of older adults have purchased long-term care insurance. It’s dropped in popularity, as premiums increased and insurers left the market. No one knows if the industry can fix its major problems.

It may be your goal to cover several years of home-based care—not nursing home care. If so, you could buy a less expensive policy with fewer features. The average annual cost for care provided by a home health aide was about $46,000, compared to $82,000 for a semiprivate room in a nursing facility. That’s about six hours of care, seven days a week. Although it is not enough for seniors with serious, disabling illnesses, it could work to relieve an unpaid family caregiver who is on-call 24/7.

If you end up needing nursing home care, you could look at a “qualified long-term care partnership policy.” It’s available in every state except Alaska, Hawaii, Illinois, Massachusetts, Mississippi, New Mexico, Vermont, and Washington, D.C. These little-known insurance products are designed to help seniors preserve their assets, if they become seriously ill, require nursing home care, and want to be eligible for Medicaid. That program pays for about 50% of nursing home costs in the country.

To qualify for Medicaid, most states have strict assets limitations. However, with a partnership policy, every dollar received in long-term care benefits is exempted from Medicaid’s asset test and protected from seizure by the state.

There’s no reliable national data about how many people with partnership policies end up on Medicaid to cover nursing home care. There’s also no good data regarding the number of these policies that have been sold or the benefits paid out to date.

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Don’t Postpone Your Retirement because of These Mistakes

Happy retirementIf we don't do a bang-up job with our financial planning, it could mean postponing retirement—or abandoning the idea altogether. That's what the CPA Practice Advisor says, and gives some examples of avoidable errors in the article, "3 Retirement Errors to Avoid."

Unfortunately, many folks don't spend a lot of time even thinking about retirement because they think it's a far-off time when money will have magically accumulated. That means no money to buy the condo in Cozumel, pay for the grandkids' education, or live a life of leisure. Someone in this situation might have to find a part-time job to make ends meet—and it's not out of the question that they could outlive their money. Don't end up without the money you need for retirement. Avoid these common mistakes.

  1. Not understanding taxes. We know that most of the time our money is taxable right away, like earnings from employment or interest on savings. But with individual retirement accounts, the taxes can be deferred. There's also tax-free money, like municipal bonds, life insurance proceeds, and 529 education savings plans. You should try to move as much taxable money as you can to the tax-deferred or tax-free categories.
  2. Acting without specialized advice. Don't think that one person can be an expert in all areas of planning. A financial advisor may handle your investment needs, but you should also work in concert with an eldercare and estate-planning attorney, especially if you are 60 or older.
  3. Not appreciating the longevity risk. Modern medicine lets us live longer. But that can create a problem of outliving your money, and it also can mean increased odds of needing nursing home or other long-term care. These can be expensive. So ask yourself if you have enough money to deal with these expenses for your entire lifetime. The sooner you tackle the longevity risk, the more prepared you'll be to live a rich life.

You still have time to get this going even if you are nearing retirement—it is never too late to make a plan.

Reference: CPA Practice Advisor (March 22, 2016) "3 Retirement Errors to Avoid"

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