Financing Assisted Living by Saving, Planning and Insurance

In March 2018, the U.S. Census Bureau reported that by 2030, all baby boomers will be over the age of 65, leading to a unique situation in demographics: 20% of U.S. residents will be at retirement age.

Part of the increase in the number of people who live long enough to be of retirement age, is because life expectancies have increased. The average U.S. life expectancy has increased from 68 years in 1950 to 79 years in 2013, according to the Population Reference Bureau cited in an article from U.S. News & World Report titled “How Should I Finance Assisted Living?”

The combination of increasing life expectancies and improvements to healthcare, means that more people are living longer after they stop working. This has led to a financial crisis for many Americans: how can they pay for the increased cost of healthcare and assistance needed, as they enjoy these additional years, and in some cases, decades.

It’s like a math problem. If you retire at age 65 and need to enter an assisted living facility 10 years later, how much money will you need to pay for the health care you’ll need by the time you reach 84? It’s impossible to calculate, because there are so many unknown factors.

Those factors are exactly what Americans need to consider, because most facilities primarily rely on private payments and Medicare does not cover the cost of assisted living facilities. It only pays for rehabilitation in a nursing home for the first hundred days. After that, the only assistance available is Medicaid. 

Medicaid coverage is supposed to kick in, only when a person has spent down all of their assets and is basically destitute.

One survey by a major financial company reports that the median monthly cost for an assisted living community is $3,750 or $45,000 a year. Long-term care by a home health aide can top $4,000 monthly or nearly $50,000 a year. 

These kinds of numbers demonstrate the need to save and plan well for retirement and for the possibility of needing to pay for assisted living. However, boomers are not at all positioned well for either retirement or assisted living. By the time people start thinking about retirement, they are usually in their 50s or 60s.

No matter when you start, starting is better than not doing anything. When you meet with your estate planning attorney, discuss how your estate is structured, in terms of paying for long-term care. Does it make sense for you to purchase an insurance policy to protect your assets and should it be owned by you or by a trust? What kind of trust?

Your estate planning attorney also is likely to have a network of professionals who help families navigate this complex world of care facilities. Understanding this system and the individual’s needs, can go a long way in making a difficult and expensive process much easier.

Reference: U.S. News & World Report (Oct. 10, 2018) “How Should I Finance Assisted Living?”

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