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The Columbia Press

Columnists & Other Opinions

Financial Focus with Adam Miller

Protect your family from long-term care costs

Adam Miller
Thursday, October 15, 2020

Like everyone, you want to remain physically and financially independent throughout your life.

But if you lose some of this freedom, the last thing you’d want is to become a burden on your family. How can you keep this from happening?

First, you need to be aware of the risk. Someone turning 65 today has almost a 70 percent chance of eventually needing some type of long-term care, according to the U.S. Department of Health and Human Services. It doesn’t necessarily mean you’ll face that likelihood.

You have either a zero percent chance of requiring long-term care (you’ll never need it) or a 100 percent chance (you’ll definitely need it).

If you think you’re in the zero category, you’re taking a gamble – and it could be a big one, because long-term care is expensive. The median annual cost for a private room in a nursing home is over $102,000, according to Genworth, an insurance company. Other long-term care services, such as those provided by a home health care aide, also aren’t cheap.

You can’t count on Medicare footing the bill – in fact, it would probably only cover a small portion of a nursing home stay and provide limited assistance for home health care. So, if you were financially unprepared for the expense of long-term care, the burden might fall on your loved ones.

This could be a big financial challenge, in two ways.

First, if a family member became your caregiver, he or she might have to abandon a career, or at least substantially reduce their working hours. Not only would this result in a loss of income, but it could lower the amounts that person contributes to a 401(k) or similar employer-sponsored retirement plan.

Second, if your family members couldn’t leave their jobs or cut back on their hours, or they were simply unable to provide the type of long-term care you need, they might be forced to pay out of pocket for a nursing home stay or home health care worker.

You have a couple of options to avoid these outcomes:

Self-insure – You could devote a portion of your investment portfolio specifically to long-term care. If you require admission to a nursing home, it may require a significant commitment of your resources.

Purchase protection – Over the past decade or so, there’s been an increase in the types of long-term care protection vehicles available. These instruments vary widely in cost and in what they cover, but by choosing a protection option, you may greatly lower the financial risk you might face. By consulting with a financial professional, you should be able to find an arrangement that’s appropriate for your situation.

Preserving your financial independence and helping protect that of your family should be a key financial goal. And you can make progress toward accomplishing this by recognizing the potential cost of long-term care and taking steps to deal with it.

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