The Circle of Life: A Guide to Long Term Care

By Private Vista on October 6, 2021

Two Women Smiling in a Long Term Care Facility

In last month’s article, we talked about “The Sandwich Generation” – defined as “Adults who have a living parent age 65 or older and are either raising a child under 18 or supporting a grown child”. With 10,000 Baby Boomers turning 65 every day, and 70% of them needing some type of Long-Term Care, now is the time to begin the conversation with them about the possibility of insuring this expensive cost.

For those that need care today in the Chicagoland area, the average monthly cost for In-Home Services is $4,576/month – assuming a 44-hour workweek at $24/hour. This seems like a bargain compared to Nursing Home Care cost of $7,756/month for a semi-private room. With the cost of care growing by nearly 8% per year, these costs are expected to rise to $9,879/month and $16,745/month respectively in 10 years.

With regards to Long Term Care, people usually fall into one of three categories; 1) Can afford the cost of care (self-insure) 2) Cannot afford the cost of care, but can afford the cost of insurance, 3) Cannot afford the cost of care or insurance. For the people that fall into the third category, the options are limited. They can either depend on family or find themselves in a Medicaid facility once all other assets are depleted.

For those individuals that may not be able to afford the cost of care or want to preserve their estate for their heirs and can afford the insurance today, here are a few things to consider when discussing Long Term Care insurance with your Financial Advisor:

Monthly Benefit – how much of the monthly cost do you need insurance to cover? Assuming you have some retirement assets and social security/pension income, you may choose to insure a portion of the cost (i.e. $3,500/month).
Benefit Period – the average stay in a nursing home is less than 3 years. If you have a history of Alzheimer’s or Dementia in your family, you may decide to look at plans that cover a smaller benefit for a longer period of time.
Inflation Protection – with the cost of care increasing each year, it’s important to have an insurance benefit that increases with this cost.
Elimination Period – once you qualify for benefits, when do payments begin?
Payment Period – how long are you expected to pay for this insurance? You may choose to pay for the insurance for life or may choose to pay higher premiums to have it paid up in 10 years.
Death Benefit – if you pass away before needing benefits, would your family receive anything in return?

Most insurance policies begin paying benefits once a doctor certifies that you are no longer able to perform 2 activities of daily living: Eating, Bathing, Dressing, Toileting, Transferring (walking), and/or Continence. If you or your loved ones are between the ages of 55 – 65, now is the time to have this conversation. Whether you choose to stay in your own home or move to a facility, preparing for these costs is a vital part of a comprehensive Financial Plan.

Article By: Randy Porzel, CFP®, RICP®. Randy is a Partner and Lead Advisor at Private Vista LLC. He began his financial planning career as an intern and worked his way up through every job at the firm. Randy finds joy in taking clients through Private Vista’s planning process, using tools that answer questions and clear uncertainty so that clients can look forward to their idea of an enriched life. In his free time, Randy enjoys serving on the boards for the Chicago Lighthouse for the Blind and The Darien Lions Club, whose mission is to serve those in the community with visual impairments.

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Sources: https://www.seniorliving.org/nursing-homes/costs/

https://www.genworth.com/aging-and-you/finances/cost-of-care.html

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