As we age, the prospect of needing assistance with daily activities becomes more likely. Planning for long-term care (LTC) ensures that you or your loved ones will have access to the support needed, while avoiding financial strain. Below, we’ll explore some common questions about long-term care, including who will need it, the associated costs, and how you can plan more effectively.
What Is Long-Term Care?
Long-term care refers to a range of services designed to meet a person’s health and personal care needs over an extended period. Unlike short-term medical treatments, long-term care focuses on helping people with activities of daily living (ADLs) such as bathing, dressing, eating, using the restroom and mobility. It can also include assistance with instrumental activities of daily living (IADLs), such as managing finances, preparing meals, housekeeping and managing medications.
Long-term care can be provided in various settings, including:
- In-home care: Services delivered in a person’s home, ranging from companionship to full-time medical care.
- Assisted living facilities: These provide housing, meals and personal care assistance for individuals who need help with ADLs but do not require constant medical supervision.
- Nursing homes: For individuals who require ongoing medical care and assistance with most ADLs, nursing homes offer 24/7 skilled nursing care.
- Adult day care: Provides supervision and social activities during the day, allowing caregivers a break while ensuring their loved ones receive care.
Who Will Need Long-Term Care?
Statistically, most people will need some form of long-term care at some point in their lives. According to the U.S. Department of Health and Human Services, about 56% of people turning 65 today will require long-term care services in the future.1 However, the duration and level of care required can vary greatly from person to person.
Several factors determine whether someone is likely to need long-term care:
- Age: The need for long-term care increases as we get older. While some individuals may need care in their 50s or 60s due to illness or disability, the likelihood grows substantially after the age of 65.
- Gender: Women typically live longer than men, which means they are more likely to require long-term care.
- Health status: Chronic conditions like diabetes, high blood pressure, and heart disease, as well as cognitive impairments such as Alzheimer’s disease, increase the likelihood of needing care.
- Family history: A family history of chronic illnesses or long-term medical conditions may also increase your chances of requiring long-term care.
How Much Does Long-Term Care Cost?
The cost of long-term care can vary depending on the type of care needed, the location and the length of time care is required. Below are some average costs in the U.S., based on 2023 data:2
- In-home care: Home health aides typically charge around $27 to $30 per hour. If full-time care is needed, the cost can range from $4,500 to $6,000 per month.
- Assisted living facilities: The national average monthly cost for assisted living is around $4,500.
- Nursing homes: For a private room, the average cost is around $9,300 per month, while a semi-private room averages $7,900 per month.
- Adult day care: The daily rate for adult day care services averages $80 to $90.
These costs can add up quickly, which is why planning for long-term care expenses is crucial. It’s important to also consider inflation and the rising cost of healthcare, which could increase these figures by the time care is needed.
What Types of Long-Term Care Insurance Are Available?
Long-term care insurance (LTCI) is designed to cover the cost of long-term care services that are not covered by health insurance, Medicare or Medicaid. There are several types of policies available:
- Traditional long-term care insurance: This type of policy provides coverage solely for long-term care services. It typically covers in-home care, assisted living, nursing home care, and adult day care. Premiums vary widely based on factors such as age, health, the amount of coverage and the length of the benefit period.
- Hybrid long-term care insurance: These policies combine long-term care insurance with life insurance or an annuity. If the long-term care benefits are not used, the policyholder’s beneficiaries can receive a death benefit. Hybrid policies are appealing because they guarantee that some benefits will be paid out, either in the form of long-term care coverage or as a life insurance payout.
- Short-term care insurance: This policy provides benefits for a shorter period, typically covering up to 12 months of care. The premiums for these policies are generally lower than traditional LTCI policies, but they are limited in scope.
The cost of long-term care insurance depends on several factors. The younger and healthier you are when you purchase the policy, the lower your premiums will be. Policies that provide more daily benefits or cover longer periods are more expensive. Finally, pre-existing conditions can raise your premiums or make it harder to qualify for coverage.
What Should I Do to Plan for My Long-Term Care Needs?
Planning for long-term care involves both financial and personal considerations. Here are some steps to take:
- Assess your risk: Consider your family health history, lifestyle and personal health when evaluating your long-term care needs. If you have a family history of chronic illness, you may want to plan for more extensive care.
- Consider your financial situation: Determine how much you can afford to pay out-of-pocket for long-term care and whether long-term care insurance is a good fit for you. It’s essential to weigh the cost of premiums against the potential cost of care.
- Explore long-term care insurance options: If long-term care insurance is right for you, shop around and compare policies from different providers. Hybrid policies may appeal if you want a death benefit or if you’re concerned about not using your coverage.
- Think about where you want to receive care: Do you prefer to age in place, or would you consider moving to an assisted living facility? Knowing where you want to receive care can help you tailor your financial planning to those specific costs.
- Talk to your family: It’s important to discuss your preferences with your loved ones. They should know your wishes in case they need to assist in making care decisions.
- Consult a financial advisor: Planning for long-term care is a complex financial decision. A financial advisor can help you create a comprehensive plan that aligns with your goals and ensures that you’re prepared for the future.
The Bottom Line
Long-term care planning is essential for ensuring that you have the resources and support needed as you age. With rising costs and the uncertainty of future needs, starting early can help protect your financial future and provide peace of mind. Whether you opt for long-term care insurance, plan to use savings, or explore other strategies, a proactive approach is key to being prepared for the years ahead.
1 CNN, “More than half of older Americans will need long-term care. Many can’t afford the rising cost,” Sept. 17, 2023. https://www.cnn.com/2023/09/16/business/aging-population-insurance-costs/index.html
2 Genworth, “Cost of Care Survey,” Dec. 2023. https://www.genworth.com/aging-and-you/finances/cost-of-care
Matt Lewis is a non-registered affiliate of Cetera Advisor Networks. LLC.
