November is Long-term Care Awareness Month. And when it comes to long-term care — such as a stay in a nursing home or home health aides' services — you’ll want to plan for potential costs.
You might think you’ll always be able to live independently, without requiring assistance — and perhaps you will. However, the odds aren’t necessarily in your favor: About 70 percent of Americans who reach age 65 will need some form of long-term care for an average of three years, according to the U.S. Department of Health and Human Services.
And every type of long-term care is expensive. Consider these numbers, taken from the 2013 Cost of Care Survey produced by Genworth, a financial security company:
• The national average rate for a private room in a nursing home is $83,950 — a 24 percent jump over the past five years. And it’s not much cheaper for a semi-private room in a nursing home — the average cost is $75,405 per year, up 23 percent from five years ago.
• A full-time home health aide costs, on average, $44,479 annually.
If you had to spend more than $80,000 annually for a nursing home, and you needed to stay in that nursing home for several years, what would it do to your savings? How would it affect your financial goals?
Many people think Medicare will pay for long-term care expenses, but Medicare only covers a small percentage of long-term care costs, which means it’s typically up to the individual to foot the bills.
You’ve worked hard to position yourself for an enjoyable retirement, so it’s important to protect your income and assets from potentially huge long-term care costs.
You have a couple of options to deal with these expenses. You could “self-insure” by incorporating long-term costs into your future budget — but that could be pretty expensive. Or you could “transfer the risk” of long-term care costs to an insurance company. A financial professional can help you choose the right solution for your needs.
If you were to enter a nursing home, you might have a physical or mental disability that could keep you from handling your affairs. So you may want to consult with your legal adviser to discuss a durable power of attorney, which would allow you to delegate your financial decisions to a relative, close friend or anyone else.
Preparing for the unexpected, including long-term care, takes time and careful planning. So why not observe Long-term Care Awareness Month by getting started on your plans?
It can be time well spent.
Joe Faulk is a financial adviser.
This article originally appeared on Crestview News Bulletin: FINANCIAL FOCUS: Plan for long-term care costs