Retirement planning is full of uncertainty. Retirees do not know how long they will live and what unexpected costs they may incur during retirement. One thing, however, is certain; our health will decline and our health care costs will increase. As stated in a Forbes article titled, “The 2 Big Misconceptions About Long-Term Care”, almost all of us will face serious limitations with aging and possibly even permanent disability. As a result, many Americans will require long term care whether at home, in an assisted living or in a nursing home care. Unfortunately, few Americans seem to be aware of this possibility and even fewer are prepared for it.
The first misconception concerning long term care is that very few people end of up needing it. However, according to research by the National Bureau of Economic Research, a 50 year old has up to a 59% chance of entering a nursing home in his or her lifetime. Similarly, according to the U.S. Department of Health and Human Services, 70% of Americas turning age 65 will need some form of long term care in their lifetime.
The second misconception is that Medicare will cover any expenses. Medicare will only cover a stay in a facility of up to a maximum of 100 days and it does not cover custodial care such as assistance with activities of daily living which is the most common form of long term care. Medicaid will pay for custodial care but there are strict asset limitations in order to qualify. As a result, Medicaid is more of a last resort for those who limited assets or who have not made any other plans.
Long term care costs are very expensive. In Michigan, the average cost for a nursing home is $8282.00 per month – nearly $100,000.00 per year. With nursing homes so expensive, it is the middle class that will likely suffer the greatest financial hardship. The poorest seniors will likely be covered by Medicaid while the wealthy will be able to shoulder the out-of-pocket costs. It is therefore critical that the middle class plan ahead to protect their estates and loved ones should long term care costs be needed.