November is Long-Term Care Awareness Month – a month dedicated to educating the public about the need to prepare for potentially devastating costs of long-term care. The more you know about these expenses, the better prepared you will be.
How expensive is long-term care? The average cost for a private room in a nursing home is more than $87,000 per year, according to the 2014 Cost of Care Survey produced by Genworth, a financial-services company. The average cost of assisted living, which provides a level of care that is not as extensive, is $42,000 per year, according to the same study. All long-term care costs have risen steadily over the past several years, with no indication that they will level off.
Many believe that Medicare will pay these costs — but that’s not the case. Medicare covers only a small percentage of long-term care expenses. You may never need a nursing home or an assisted living facility, but can you afford to jeopardize your financial independence — or impose a potential burden on your children?
You have two options to pay for long-term care: Self-insure or “transfer the risk” to an insurer.
If you self-insure, you need to set aside a considerable sum. If you choose this self-insurance route, but you never need a significant amount of long-term care, you could use the money for normal living expenses and your estate. However, if you did need nursing home care, you could end up going through all your money.
As an alternative, you could transfer the risk of paying for long-term care to an insurance company. Many plans are available today, so to find the choice that is appropriate for you, consult a financial advisor. Here’s a word of caution: the premiums for this type of protection rise rapidly as you get older, so if you are considering adding this coverage, you may be better off by acting sooner, rather than later.
None of us know with certainty what the future holds. Ideally, you will remain in good shape, both mentally and physically, with the ability to take care of yourself. But, as you’ve heard, it’s best to “hope for the best, but plan for the worst.” Take the lessons of Long-Term Care Awareness Month to heart and start preparing yourself for every scenario.
Information from Edward Jones, provided by Jim Talley, financial advisor at Edward Jones, 2703 Beaver Ave., 279-4179.