As you age, additional care and costs become inevitable. Even with the greatest medical innovations of today, about 35% of people will need nursing facility care for an average of one year.will need long-term support and services by the time they reach 65 years old. About
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?
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. 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.
Consider funds you already have available
You've worked all your life and chances are that you've. 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:
- 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 . 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
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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