Most of us are eagerly anticipating those golden years of retirement. But one aspect of retirement planning we don’t like to think about is long-term care. Research suggests that most Americans turning 65 this year will need at least some form of long-term care in their lifetimes, (1) and long-term care is no small expense. If you haven’t already built long-term care costs into your retirement plan, you may want to begin planning for those costs sooner rather than later.
Keep in mind that the cost of long-term care depends on what type of care is needed and the location in which you receive long-term care services. According to the Genworth Cost of Care Survey, the national median costs of long-term care range from around $1,600 per month for adult day care services to around $8,800 per month for a private room in a nursing home. (2)
Unfortunately for Californians, our long-term care costs are above average (much like many other expenses), which means it’s even more important that you and your family prepare for the possibility of these significant costs.
Cost Of Long-Term Care In California
The following data shows average costs based on facilities all over California, so the actual costs of care may vary drastically in your specific location. Additionally, because some long-term care needs can be fulfilled by family and friends, these costs may not be necessary for all retirees depending on the support group of the person needing care.
On the other hand, some old-age illnesses such as Alzheimer’s will almost always result in the need for long-term care during the late stages of the disease, despite how supportive or available loved ones are to help.
No matter what, it’s worth considering the need for long-term care costs as part of your retirement plan. The following table shows the median cost of long-term care services in California:
Type of Care
Monthly Median Cost in 2020 (3)
Adult Day Health Care
Homemaker Services and/or Home Health Aide
Assisted Living Facility
Nursing Home: Semi-Private Room
Nursing Home: Private Room
As you can see, costs in California are higher than costs in other areas of the United States and the expenses can be significant. Nursing home care, whether in a semi-private room or private room, may be well above most people’s monthly mortgage payments.
So how can you build these expenses into your retirement plan if you had planned on mitigating housing costs in the remaining years of your life?
Options To Pay For Long-Term Care
If thinking about paying for these costs on your own feels overwhelming, you have options. The three most common options include:
- A stand-alone long-term care insurance policy
- Addition of a long-term care rider to a life insurance policy
- Long-term care add-on to a fixed or indexed annuity
Stand-alone policies have been decreasing in popularity because the annual premiums can be quite expensive and the policies usually offer no cash benefit to survivors. Therefore, stand-alone policies may only be a good option for those who can afford the premiums and are relatively sure they’ll need long-term care coverage later in life.
Two better options might be to add long-term care insurance to existing contracts you own. If you have a permanent life insurance policy, many insurers offer an add-on called a long-term care rider. For an additional premium, the rider may come with death benefits.
And if you own an annuity, you may be able to purchase a similar add-on, in which additional amounts would be added to your monthly annuity income if you ever need to pay for long-term care.
Partner With An Expert To Make The Right Decision
Long-term care expenses are costly as well as likely, so it’s best to incorporate them into your retirement plan. You don’t want to face long-term care unprepared, and because everyone’s situation is unique, a variety of factors go into determining how you plan for it. And with all of the available options, it can get overwhelming quickly.
As with any major financial decision, partnering with a professional is a wise move. Instead of going at it alone, partner with our trusted experts at HBA Wealth. We can help you understand your options and make the best decision for you and your family. Contact us at (626) 529-8347 or email Ricky directly at firstname.lastname@example.org.
About Haydel, Biel & Associates
Haydel, Biel & Associates is an independent financial advisory firm serving individuals and families near Pasadena, California. The firm was founded in 2004 by Chris Haydel and Ricky Biel with a desire to provide unbiased, client-centered, community-based financial advice. Together, they have built a practice that has grown into a family of caring, smart professionals committed to blending proven investment methodologies with creative financial technologies that make it easier than ever to accomplish your goals. They strive to keep things simple and fun to give their clients peace of mind and alleviate financial stress. HBA Wealth takes care of their clients’ needs first and foremost and goes the extra mile to make their clients’ finances grow. To meet and see how the HBA Wealth team may be able to help, contact them today at (626) 529-8347 or email Ricky directly at email@example.com.
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