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Talking with Clients about Long-Term Care

Research shows that the cost of long-term care continues to rise with significant consequences for expenses in retirement. Yet how many consumers would consider these costs without the prompting of a financial advisor?

According to the U.S. Department of Health and Human Services, 70% of those turning 65 will require some form of long-term care during their lifetime. In most circumstances, the cost of long-term care is not covered by Medicare, leaving clients to pay these expenses out of their own savings. What are these costs likely to be, and what strategies can mitigate these costs?

Cost of Long-term Care

Defining the cost of long-term care is complex. The cost of engaging a home health aide differs from the cost of living in a nursing home or an assisted living facility. The U.S. Department of Health and Human Services reported that, in 2010, the average costs for long-term care were as follows:

  • $6,235 per month for a semi-private room in a nursing home
  • $6,965 per month for a private room in a nursing home
  • $3,293 per month for a one-bedroom unit in an assisted living facility
  • $21 per hour for a home health aide
  • $19 per hour for homemaker services
  • $67 per day for services in an adult day health care center

The costs vary greatly depending on the type of care or services required and the duration of the care. Clients need to consider this variability in their retirement planning.

Location also has an impact on long-term care costs. In 2012, the average annual cost for a private room in an assisted living facility was $36,000 in Florida, but $44,520 in California. And by 2037 that cost is projected to more than double to $73,568 in Florida—and skyrocket over 189% to $128,773 in California. As you might guess, costs in the Northeast and on the West Coast are generally higher than those in the South or Midwest. Where you clients incur long-term care costs can be a significant factor calculating their retirement needs.

Paying for Long-term Care

Statistics show that most Americans will require some form of long-term care, yet according to the Center for Retirement Research at Boston College, only 13% of single adults have long-term care insurance. Many of those who have purchased long-term care insurance are wringing their hands as premium increases leave them wondering whether they can afford to keep their policies. For example, the federal government will raise premiums in the Federal Long-term Care Insurance Program by an average of 83% in 2016. This leaves consumers weighing the increasing cost of long-term care insurance against the possibility of paying staggering long-term care costs out of pocket.

Financial advisors have a challenging role. Advisors need to help clients understand the very real possibility that they will need long-term care during their retirement years. Advisors also need to help clients understand the potential costs of that care and educate clients about their options for covering those costs. As with other areas of financial planning, there is no one-size-fits-all approach. A long-term care insurance policy may work for some, while a hybrid long-term care policy with life insurance may be better for others. Some clients may be able to use traditional investments to prepare themselves for the possibility of needing long-term care. Other clients or their parents may be eligible for assistance through state Medicaid programs.

The Retirement Analysis Kit (TRAK) can help advisors provide meaningful long-term care education to clients, helping them understand their options in the context of the complete retirement plan. TRAK retirement planning software can be customized easily to illustrate nearly any scenario, allowing advisors to fulfil their fiduciary responsibility and build trust with clients.

This entry was posted in Growing Advisors Business, Long-term Care by Edward Dressel
    

Trust Builders, Inc. has a long history of working with corporate accounts of all sizes. Trust Builders, Inc. will draw on our experience to help your advisors increase their sales through client education.

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