Are You Prepared for This Looming Retirement Expense?

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Everyone needs some level of medical care during retirement. But one type of care — long-term care — generates widespread confusion, according to a new survey by The Associated Press-NORC Center for Public Affairs Research.

Some Americans gamble by assuming they won’t require professional long-term care. Others expect to need it, but have varying opinions about who should cover the expense — with few Americans preparing to fund their own care.

The number of seniors in America is swelling. As of 2014, there were some 46 million Americans over age 64, according to the Associated Press. By 2060, there will be an estimated 98 million seniors.

The majority of those seniors will need at least some long-term care.

What exactly is long-term care?

Long-term care is not the same as medical care. It entails help with everyday tasks such as bathing, cooking and remembering to take medications.

The main options for long-term care include moving into a nursing home or assisted living community, or hiring an aide to provide in-home support.

Long-term care costs are generally also separate from — and in addition to — medical care costs.

Fidelity Investments estimated last year that the average 65-year-old couple who retired in 2016 would need about $260,000 to pay for lifetime medical expenses. That amount would go toward costs like health insurance premiums and co-payments and out-of-pocket medical expenses.

The couple would need an additional $130,000 for long-term care expenses.

The AP reports that about 3 in 4 Americans ages 40 and older have misperceptions about long-term care costs, however. Notably, they tend to underestimate the cost of nursing home care. And it is more expensive than care from assisted living communities or in-home aides, with long-term care costs ranging from $6,000 to $8,000 per month.

Who covers long-term care costs?

One way to cover the cost of long-term care is to buy long-term care insurance. Money Talks News founder Stacy Johnson details the pros and cons of it, as well as who needs to buy it, in “Ask Stacy: Should I Buy Long-Term Care Insurance?

Medicare, the federally subsidized health insurance program for seniors, does not cover the cost of most care received from nursing homes, assisted living facilities, or home health care aides.

So, without long-term care insurance, seniors may be left to tap retirement savings or burden family. Few seniors seem aware of this, however. Consider these findings from the AP-NORC survey:

  • 57 percent of Americans over age 39 expect to rely on Medicare quite a bit, or completely, for ongoing living assistance.
  • Over half of older Americans expect to rely heavily on Social Security to cover long-term care costs. However, the average Social Security payment is only $1,348 per month.
  • Only 16 percent of older Americans expect to rely on long-term care insurance.

To make matters worse, few older Americans plan for their ongoing assistance needs. For example, the survey found that two-thirds of them have done no planning or only a little planning.

Depending on your age and financial situation, it might be time to look at long-term care insurance. As we point out in “Retirement Is Coming — Make These Money Moves in Your 50s,” it’s a purchase best made by sometime in your 50s:

“If you are going to buy long-term care insurance, which pays some or most costs should you become unable to care for yourself, your 50s are the years to do it. Wait much longer and premiums become prohibitively expensive. Also, you could develop health problems that could disqualify you for coverage.”

So how much planning have you done to cover your long-term care in retirement? Let us know below or on our Facebook page.

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