It's hard to read a newspaper or watch television these days and not see a story about retirement. Americans are becoming increasingly aware of the importance of saving for retirement and with good reason: The need to make their savings last is even greater as today's retirees may spend 30 or more years in retirement. And for women, who typically live longer than men, the need to save is even greater.
While much attention is given to the importance of retirement saving, little is given to how to protect those assets. A lifetime of savings can be wiped out by an unexpected need for nursing home, assisted living, or at-home care. The escalating costs of this long-term care can put a strain on hard-earned dollars strategically invested for retirement.
Long-term care is the assistance provided when a person can not perform activities of daily living due to a cognitive impairment like Alzheimer's, age, illness, or injury. For example, when someone has trouble with simple functions such as bathing, eating, or dressing, he or she may require some kind of assistance.
Today, one in four Americans between ages 65-74 and 62 percent of those over 85 suffer some limitation of activities. For women especially, the risk of needing long-term care is quite real: They are almost twice as likely as men to need a nursing home after age 65 and are more apt to have a longer length of stay.
Long-term care services—whether received in the home, assisted-living facility, or nursing home—are expensive. Today, the annual cost of a nursing home stay averages $75,000 and is expected to reach $207,000 by the year 2030. Most Americans cannot save enough to cover these costs on their own, and health insurance generally does not pay for long-term care services.
Many mistakenly believe that long-term care is covered under Medicare and Medicaid, but they're wrong. Medicare provides primarily short-term, skilled nursing-home care following hospitalization. Long-term care costs are only covered by Medicaid if one's assets are depleted.
A proven way to cover costs and protect retirement resources is long-term care insurance. Without long-term care insurance, anyone-particularly retirees-risk having their lifetime savings wiped out by even a relatively short stay in a nursing home.
Long-term care insurance covers a range of services-from someone coming into the home weekly to 24-hour skilled nursing care. Services can be provided at home; in a nursing home or community-based care facility, such as adult day care; or in an assisted living setting.
The age at which you purchase a policy affects its cost: The younger you are, the lower the premiums. A 45-year-old pays about half of what a 60-year-old pays for long-term care insurance.
Generally, what you pay in premiums is far less than what you would pay for long-term care services. A 45-year old woman today could pay about $950 a year for a long-term care policy. By age 85, if she enters a nursing home, she will have paid about $38,000 in premiums for her long-term care insurance policy—far less than the nearly $420,000 that a one-year stay in a nursing home will likely cost in 40 years.
Long-term care insurance is an integral part of retirement planning. It provides dignity, choice, and financial protection should you or a loved one need long-term care services. For information about purchasing long-term care insurance, call your insurance agent or financial planner.