Evans Tax Advisors' Blog

How Assisted Living and Nursing Home Expenses Can Wipe Out Your Savings

Part 1

“I never thought I would end up in a place like this.” This is what Bob told me when I met him at the Assisted Living Facility. Bob’s wife had a stroke and he could no longer care for her so they had to move into an Assisted Living Facility from his rural home. This was a huge transition in lifestyle but it was also a financial strain as instantly they went from comfortably being able to pay all their bills with money left over to having $2,000 more in expenses each month than they had income. Suddenly finances were a BIG worry and the reality of Long Term Care costs hit them.
Long Term Care (LTC) Expenses, sometimes called Elder Care Costs, can be one of the biggest threats to your lifetime savings. Long term care can mean anything from Home Care, to Assisted Living to Nursing Home or an Alzheimers/Memory Care Facility. In this series of articles we will take away some of the confusion about how much all this can cost, what government programs really pay for and how you can plan for the worst without costing a fortune.
In Part 1, we will discuss what Long Term Care options are available and give you an idea about the costs. In Part 2, we will discuss the financial aspects of paying for Long Term Care and how to plan so these costs don’t wipe out your life savings.
How Much Does Long Term Care Cost and What is Available?
Well, it depends. About 50% of the population ends up needing long term care of some sort. The basic types of care are:
Home Care – $500 to $5,000 per month. This can be anything from having someone help you with your cooking and laundry to help with medical issues including caring for someone who is bedridden. Often we see family members taking over the home care role, which can become very tiring to the care giver. The cost to have someone full time is prohibitive for most people. So depending on what is needed home care can be anywhere from $500 per month to $5,000 per month.
Assisted Living – $2,500 to $6,000 per month. Assisted living can be anything from just an apartment that has laundry and meal service to providing nursing and physical therapy. Assisted living can work well when one spouse needs help and the other spouse is still healthy so that a couple can still live together. Assisted living can run from $2,500 to $6,000+ per month depending on your needs.
Nursing Home/Memory Care – $5,000 + per month. These types of facilities are typically expensive usually starting at $5,000 per month.
Group Home – $2,500 + per month. A Group Home can often provide most of the care that any of the above facilities provide. Some of our clients prefer Group Homes because they feel that their family members get better attention because these facilities are usually smaller. Often these facilities are renovated homes. The downside of Group Homes can be the lack of privacy in that most rooms double occupancy. Group Homes are often more affordable than a Nursing or Memory Care Facility with monthly costs starting around $2,500 per month.
As you can see LTC costs can be substantial. Of course if both a husband and wife need care then the costs can be twice a big. How do you plan so that you are not gambling your future on not needing expensive care? There are a number of ways to plan for long term care expenses.
Long Term Care Insurance is probably the most discussed in the popular press. Long term care insurance is typically expensive. LTC Insurance can cost anywhere from $1,500 per to $5,000 per year per person – usually the cost of a nice vacation each year. Keep in mind these are costs for one person. At $3,000 per year you will have spent $30,000 in ten years for one person on something you might not need. In some instances LTC insurance might make sense if you can afford it and you don’t have the assets to use Asset Based Long Term Care Funding (see next item).
Long Term Care Insurance without the Premiums – Few people have heard of this strategy. This strategy is also called Asset Based Long Term Care Funding. This strategy can often give you the best of both worlds. It allows you to set aside assets that can be converted into an income stream for long term care if necessary or if you don’t need long term care, then your assets have continued to grow at reasonable rates and can be passed on to your kids. You also avoid paying any LTC Insurance Premiums.
Government Programs – Medicare, Medicaid, and Veterans Benefits. Government benefits are very complicated. Most seniors are familiar with Medicare for their day to day health insurance. Medicare doesn’t pay for long term care. Medicaid will pay for LTC expenses but has some big drawbacks. Medicaid is basically welfare for the elderly with health problems. Veterans benefits can be a life saver for middle class veterans and widows of veterans who need long term care.
We will go into LTC Insurance, Asset Based Long Term Care Funding and Government Benefits more in Part 2 next month.
Sid
P.S. We are in the process of helping Bob, who we mentioned at the beginning of the article, get an extra $1,250 per month in tax free income from the Veterans Administration.
P.P.S. We work on the financial side of Long Term Care and have developed a great deal of firsthand knowledge about the types of facilities and their costs in Albuquerque. If you or a family member may need to move to a LTC facility let me know and I can let you know what facilities are available in the Albuquerque area.