Understanding long-term care

Addressing the potential threat of long-term care expenses may be one of the biggest financial challenges for individuals who are developing a retirement strategy.

The U.S. Department of Health and Human Services estimates that 70 percent of people over age 65 can expect to need long-term care services at some point in their lives. So understanding the various types of long-term care services — and what those services may cost — is critical as you consider your retirement approach.

Long-term care is not a single activity. It refers to a variety of medical and non–medical services needed by those who have a chronic illness or disability — most commonly associated with aging.

Long-term care can include everything from assistance with activities of daily living — help dressing, bathing, using the bathroom, or even driving to the store — to more intensive therapeutic and medical care requiring the services of skilled medical personnel.

Long-term care may be provided at home, at a community center, in an assisted living facility or in a skilled nursing home. And long-term care is not exclusively for the elderly; it is possible to need long-term care at any age.

Long–term care costs vary state–by–state and region–by–region.

The national average for care in a skilled care facility (single occupancy in a nursing home) is $87,600 a year. The national average for care in an assisted living center (single occupancy) is $42,000 a year. Home health aides cost an average of $20 per hour, but that rate may increase when a licensed nurse is required.

Often, long-term care is provided by family and friends. Providing care can be a burden, however, and the need for assistance tends to increase with age.

Individuals who would rather not burden their family and friends have two main options for covering the cost of long-term care: they can choose to self-insure or they can purchase long-term care insurance.

Many self-insure by default — simply because they haven’t made other arrangements. Those who self-insure may depend on personal savings and investments to fund any long-term care needs. The other approach is to consider purchasing long-term care insurance, which can cover all levels of care, from skilled care to custodial care to in-home assistance.

When it comes to addressing your long-term care needs, many look to select a strategy that may help them protect assets, preserve dignity and maintain independence.

If those concepts are important to you, consider your approach for long-term care.