Have you built long-term care costs into your retirement plan? If not, you may want to begin planning for those costs sooner rather than later. 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 expensive.
Of course, 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. This 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
No one can predict the future, but long-term care expenses are a very real possibility you may have to contend with. You have a lot of options in front of you, so we don’t blame you if you’re feeling overwhelmed. Everyone’s situation is different and a variety of factors should determine how you build long-term care considerations into your retirement plan.
Instead of making this decision alone, partner with a trusted expert like our team at 1on1 Financial. We can help you understand your options and make the best decision for you and your family. Call our office today at 909-981-1720 or simply click here to schedule a free 15-minute introductory phone call!
About 1on1 Financial
1on1 Financial is an independent financial advisory firm specializing in guiding working and retired professionals, executives, and business owners along the path to financial well-being. Founded in 1997, we use a team approach to help our clients accumulate wealth, generate income, preserve their life savings, and strategically plan for the distribution of their estate. With more than 50 years of combined experience in the financial services industry, we remain true to our fundamental mission: to provide personalized guidance, treatment, care, and service so our clients can gain control of their future and feel confident in their financial life.