How To Handle The Rising Cost of Long-Term Care

I'd like to bring your attention to an aspect of financial planning that's seeing significant shifts - the rising cost of long-term care

The Alarming Reality: Inflation's Grip on Long-Term Care

Inflation, an economic concern we're all too familiar with, has been especially rampant in 2023. From food and energy to various services, prices are soaring. However, what stands out is the surge in the cost of long-term care. So much so, states like Washington have made it mandatory for residents to purchase a long-term care insurance policy. The strain of caring for an aging population, especially the baby boomers, is significant. Coupled with the fact that Medicare doesn't cover long-term care, but Medicaid does, states are feeling the pinch of rising costs.

Crunching the Numbers: Genworth's Eye-Opening Calculator

If you're curious about these escalating costs and want a visual representation, I recommend checking out Genworth's online calculator. Based on my personal experience from St. Louis, in 2023, the average costs are:

  • Home Health Aid: $5,800/month
  • Assisted Living Facilities: $4,350/month
  • Skilled Nursing Facility (Single Room): Over $7,100/month

Fast forward 20 years to 2043, with a 3% inflation rate, the costs nearly double:

  • Home Health Aid: Approximately $120,000/year
  • Assisted Living: About $94,000/year
  • Skilled Nursing Facility (Private Room): Roughly $156,000/year

Illustration of The Rising Cost of Long-Term Care

The Rising Cost of Long-Term Care

Bear in mind, these figures are for a region with a comparatively low cost of living. In states like California, New York, or Illinois, expect even steeper prices.

Tackling the Rising Costs: The Role of Inflation Riders

So, how much long-term care insurance should you buy given these projected costs? Here's where the concept of inflation riders comes into play. These are provisions in an insurance policy that allow your benefits to be adjusted in line with inflation, ensuring that the payouts you receive in the future reflect the increased costs of services.

But is it worth it? Let's mull over this: Is the extra expense in today's dollars worth receiving payouts in inflated dollars down the line? Here's some food for thought: If you secure a policy with an inflation rider, your premiums remain fixed, even as the value of your coverage increases annually. Consider it like a mortgage; the monthly payment remains the same over decades, but the buying power of the money changes.

In Conclusion

The rising cost of long-term care is undeniable, but it's not insurmountable. By understanding these costs and planning strategically, you can ensure you're well-covered when the need arises. It's vital to factor in inflation, especially when determining how much long-term care insurance you should buy.

Thank you for joining me on this journey. If you're keen to delve deeper into this topic, or if you have questions about your unique situation, please don't hesitate to reach out for a consultation. Let's work together to design a strategy that's tailored for you.