How can I plan for a future need for nursing home care for myself or aging relatives?

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  • 2 out of 2 people found this answer helpful

    CFP®, MSFS San Luis Obispo, CA

    There are a variety of products that are available to help cover the costs of nursing home care, assisted living care and Alzheimer's care. These products range from Long Term Care insurance to Life Insurance as well as hybrids of the two.

    You can always try to "self-insure" and save the money you might need - but it can be a LOT of money.

    Understand that until you are in a Skilled Nursing Facility (more like a hospital than a place most folks want to be), Medicare does NOT cover any of those costs so you or your family will have pay for your care when you get too old and sick to care for yourself.

    There are loads of variables from family history to your sex to how well you have taken care of yourself (or your spouse). Planning for this should be done with the help of an expert, preferably a CFP® professional who can balance this issue with all the other moving parts to your personal financial life.

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  • 2 out of 2 people found this answer helpful

    Palo Alto, CA

    I'm going to answer this a little differently, based on lots of experience with clients in this regard. The best way to plan for assisted living or a skilled nursing facility is to first accept the fact that there's a good chance you or your loved one will need it someday. This sounds so simple, but the mistake almost all of our clients make is to wait until they're in a crisis, and then call us for help. This limits their choices and forces them to make decisions under duress, which is a lousy way to optimize the process.

    So whatever financial decisions you make (and the advisors have given you great suggestions here), please remember that the first step in this process is to be realistic, think about the hard stuff, and do the work before you find yourself in a crisis!

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  • 1 out of 1 person found this answer helpful

    CFP® San Francisco, CA

    Future long term care costs present a challenge in many ways.  It is hard for individuals and family's to understand what the problem is unless they experience it with a loved one or friend.  Part of the solution is money but there are other necessary pieces of the puzzle as well as different decisions to make.  

    Three ways to pay for future long term care expenses

    1.  Buy long term care insurance which is structured to provide a daily benefit for a set period of time.  This is the most comprehensive solution for institutional or at home care services and also the most costly as well as having its own risks:

    a.  increasing premiums resulting in surrendering the policy at the time of life you most likely might need it.

    b.  financial health of the insurance company.

    c.  costs of long term care exceed your insurance either in daily costs or the time period your insurance is in effect. 

    d.  underwriting standards are becoming tighter so you might not qualify.

    e.  it does not cover your costs unless you are diagnosed with cognitive dysfunction or lose 2 of 6 activities of daily living.  For instance my parents who are 95 live in a retirement home that basically provides custodial services with independent living.  None of their costs would be covered by a long term care insurance policy.

    2.  Have an agreement with family or friends that they will take care of you as best they can in your home or their home.  This can be considered a kind of retro solution although I see this more frequently among my clients lately.  Why?  Because individuals and families have not prepared for the caring situation and the attendant expenses.

    3.  Self insure.  Use a percentage of your own assets to set aside for future health care expenses.  One of the problems with long term care insurance is that individuals do not like the "use it or lose it" nature.  Unlike homeowner's insurance where you hope you never have to make a claim and you pay premiums every year, long term care insurance is viewed through a different framework.  It is a real problem.  In my opinion a more effective framework to use is view LTC insurance as a total $ benefit.  If you purchase a policy for 3 years with benefits of $200/day the total benefit is approximately $216,000 minus the elimination period of 90 days or $18,000.  If you pay premiums of about $3,500/year for 20 years before you collect your benefit that adds another $70,000 to the cost.  I am leaving out any benefit escalation and time value of money.  Trying to make it simple.  If you can set aside $200,000 and add funds each year to that bucket-say $3,500 then you have self insured for a high % of future potential costs.  Remember that any social security benefits you receive will contribute to paying for these costs as well as any pension distributions you are receiving.  Also if you don't spend these funds they become yours to pass on to your estate.  So as you can see there are many potential solutions with many pros and cons.  It is important to pay attention to this issue as your develop your plans.

    As far as planning for an aging relative's long term care expenses it behooves you to discuss their wishes and use of resources to maintain their quality of life.  If you have a parent or adult child who depends on income from you it definitely has a big impact of your planning.  You need to pay attention to this as a future liability and be thoughtful and intentional about how you will address this.


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    Advisors offer free consultations to determine if you're a good fit for one another. Providing more information in the consultation request will help advisors have a better sense of what you're looking for. The advisor will contact you via email and set up a time to meet. Depending on the advisor, and your preferences, this could be an in-person or online meeting. You are under no obligation to engage them after meeting with them.
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  • 0 out of 1 people found this answer helpful

    AIF®, CDFA, CFP® Leesburg, VA

    As advisors, our software provides location specific information on these costs.  Additionally, think about family history, your own health, and what insurance you currently have or might qualify for - Long Term Care Insurance, Life Insurance and of course health insurance.

    Health care (especially at the end of life) is often a very big cost.  If you are part of a couple, you'll want to protect assets for the person who does not get ill. 

    We can model these costs and this is an area where we won't know what the cost is until we look back.  I would say, make every sensible investment (diet, sleep, exercise) that you can in your own health and then save in an HSA (health savings account that works like an IRA for health care) if you qualify and stay current on vaccinations and checkups.

    Was this a helpful answer?

    Advisors offer free consultations to determine if you're a good fit for one another. Providing more information in the consultation request will help advisors have a better sense of what you're looking for. The advisor will contact you via email and set up a time to meet. Depending on the advisor, and your preferences, this could be an in-person or online meeting. You are under no obligation to engage them after meeting with them.
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