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How to effectively plan for nursing home costs

Plan for long-term care expenses now to avoid a lack of access in the future.  Getty Images

As you age, additional care and costs become inevitable. Even with the greatest medical innovations of today, about seven out of every 10 people will need long-term support and services by the time they reach 65 years old. About 35% of people will need nursing facility care for an average of one year. 

But nursing homes can be expensive. According to Genworth, a private room in a nursing home can cost more than $100,000 per year. Moreover, the company suggests that by the year 2031, a private room will cost over $145,000 per year. 

Sure, you may have set up a comfortable retirement, but can your retirement account feasibly absorb more than $100,000 per year in specialized care costs? How do you effectively plan for such an expense?

Buy long-term care insurance now to help you cover the high and growing cost of nursing homes

How to effectively plan for nursing home costs

There's a good chance that you'll need nursing home care at some point in your life. Here's how to plan for that expense.  

Determine how much money a nursing home may cost

Start by determining how much money a nursing home might cost you. To do so, think about when you'll potentially need this care. A good rule of thumb is to plan for care around the time you turn 70. 

Genworth offers a cost of care tool that you can use to get an estimate of how much a nursing home might cost in the future. For example, let's say you expect to need a nursing home in 2035. According to Genworth's tool, a private room will cost you $163,972 per year, but you may be able to get a semi-private room for about $143,545 per year. 

Buy long-term care insurance to make sure you can afford the care you need

Consider funds you already have available

You've worked all your life and chances are that you've planned for your retirement. So, you likely have some funds already in place. Consider how much money you have that's already available to you. 

For example, let's say you qualify for the maximum social security benefit of $3,627 per month and you receive a $2,200 pension payment each month. That means you already receive $5,827 per month or $69,924 per year. That won't cover the total expenses quoted above but it can certainly help, particularly if you have long-term care insurance to make up the difference.

Purchase a long-term care insurance policy to bridge the gap

"Long-term care insurance can be a great tool to help pay for nursing homes," says Kelsey Simasko, attorney at Simasko Law in Mount Clemens, Michigan. However, she says you should do your research because "not all policies cover all types of care."

Follow these steps to compare policies

  • Know how much coverage you need: The average person who needs nursing home care will require about a year of residency. However, it may be wise to plan for two years of care to be sure you have enough coverage. Determine how much coverage you need based on the difference between your cost of care and your retirement income. 
  • Request at least three quotes: Get quotes from at least three different long-term care insurance providers. When you do, be sure to ask the insurance company's representative as many questions as you need to build a thorough understanding of the insurance they provide. For example, ask about coverage caps and limits to the types of care covered. 
  • Compare your options: Compare your options based on what you learned as you requested quotes. Compare the pros and cons of each plan to determine which option fits your needs best.
  • Consider riders: Consider adding riders to your policy to customize your coverage. For example, it may be a good idea to add an inflation protection rider to make sure your benefits grow alongside inflation.   

Compare your long-term care insurance options now

The bottom line

There's a strong chance you'll spend some time in a nursing home later in life and an even stronger chance that you'll need some kind of long-term care. Unfortunately, that care can be very expensive. Follow the steps above to make a plan now. This way, you'll be sure you have access to the care you need in the future. 

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