Long-term care is often needed as people age and their physical and mental capabilities decline. However, because most long-term care is not considered medical care, it’s not covered by Medicare. Some Medicaid coverage exists, but the requirements are stringent. And without long-term care insurance in place, long-term care costs fall on your loved ones. As a family caregiver, you can be proactive by researching long-term care costs now and planning a budget to meet them.
What does long-term care include?
In the aging population, 69% of individuals will require long-term care of some kind, and the average time a senior requires long-term care is three years. Long-term care includes both medical and non-medical care needed for individuals who, due to chronic illness, disability or aging, are not able to care for themselves. Health care, personal needs and daily activities can all be part of long-term care, either in the home or in a facility.
How expensive is long-term care?
Long-term care insurance is expensive, but long-term care itself costs even more, with the average American spending approximately $140,000 on out-of-pocket long-term care costs.
While long-term care insurance may be costly as well, depending on age and health conditions, even an annual premium on the higher end, paid over 20-30 years, is still more affordable. LTC insurance also offers the benefit of being paid for over time, in advance.
Long-term care costs do vary with each individual’s situation. In general, a nursing home is the most expensive type of long-term care, but senior housing options range in cost and in the type of care offered. See our state-by-state guide to senior housing to learn more about your options.
Long-term care may also include in-home caregiving help. A senior parent may continue to live in their own home, with assistance from caregivers, home health aides, and other members of the caregiving team. Or perhaps your parent moves into your home; this scenario can offset some of the cost of long-term care facilities, but it comes with its own costs that need to be considered. For example, you may need to make modifications – such as railings and ramps – so your parent can safely navigate your home.
How can I budget for long-term care?
To set a budget for long-term care, go through the list below and make an estimate and comparisons of the monthly costs. This calculator can help you estimate what long-term care might cost in your area.
- Housing in a long-term care facility: This includes assisted living, a nursing home, memory care or a retirement community.
- Daytime care in a facility: Even if your parent lives with you, a daytime program or care facility may be needed during your working hours or to give you a break.
- Caregiving help: Resources might include a home health aide, personal care assistant, professional caregiver or caregiving assistant to help with daily activities and needs.
- Household help: You may need help with cleaning, cooking, running errands or providing other help so you have time to provide caregiving or take care of yourself.
- Supplies, tools, and maintenance costs: Be sure to include incontinence care, medical alert devices, safety helps and adaptive devices to your budget.
Also, consider any one-time modifications or purchases, such as bathroom remodeling, safety railing, scooters, ramps and lifts. Divide the total cost by the number of months needed to pay for the purchase in full: 12 months for a one-year payoff, 24 for a two-year payoff, etc. From these numbers, you can create an estimated monthly budget for long-term care.
How can I pay for long-term care?
For many, retirement income will cover some portion of long-term care, but a combination of resources may be needed for others.
First, look into liquidating assets. For example, if your parents own a home but will be moving into an assisted living facility, the sale of the home may be enough to cover several years in the facility. Other owned property, such as a car, boat or vacation property, can be liquidated if they’re no longer in use, with the proceeds going straight into the long-term care fund. If your parents wish to stay in their own home with caregiving help, a home equity loan may help cover the cost of long-term care.
Other potential financing options include bridge loans, immediate annuities and rental income:
- Rental income is another option for funding long-term care without selling the family home. If you go this route, be sure to use a legal lease and obtain the proper occupancy permits and insurance.
- Immediate annuities are another option worth investigating; in exchange for an initial lump-sum investment, the annuity provides a guaranteed income. The annuity income can be for a set number of years or for the rest of one’s life, depending on the policy purchased.
- Bridge loans were originally meant to allow for the purchase of a house while waiting on the sale of the currently owned house. Some financial companies, such as Elderlife Financial Services, have developed bridge loans specifically for long-term care needs.
While it can be intimidating to face the long-term care costs ahead, it’s better to be knowledgeable and start getting prepared. Many options, such as long-term care insurance, are much more financially viable when purchased earlier.