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How Much (If Any) Long-Term Care Will You Need in Retirement? Thumbnail

How Much (If Any) Long-Term Care Will You Need in Retirement?

According to a recent study by Fidelity, a 65-year-old couple retiring today will need $300,000 to cover their medical expenses. Unfortunately, that eye-watering number only includes insurance premiums, deductibles, and copays. If you or your spouse need long-term care, which isn't covered by Medicare, your health care costs could end up putting a serious crack in your nest egg.

Now, I don't say that to scare anyone. The point of our conversation on today's episode is to underline just how important it is for seniors to understand what the potential out-of-pocket costs of long-term care can be, what kinds of long-term care insurance options are available, and how to incorporate your health care needs into your financial planning.

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1. What are the costs of long-term care?

The National Institute of Aging defines long-term care as, "a variety of services designed to meet a person's health or personal care needs during a short or long period of time. These services help people live as independently and safely as possible when they can no longer perform everyday activities on their own." Most of the discussion and planning around these services centers on things like in-home nursing or extended stays at assisted living facilities. Medicare only covers up to 100 days in a "skilled nursing facility," which usually means some type of rehabilitation or recuperation from a health problem. And most seniors with a solid retirement plan won't qualify for Medicaid coverage.

Genworth provides a handy tool where you can punch in your zip code and look up the average cost of long-term care in your area. Right now, the median cost of assisted living in Kansas City is around $4,500 per month1. Staying in a nursing home with a private room will cost about $7,500 per month1.

2. How much long-term care will I need?

According to Health and Human Services, 70% of folks turning 65 this year will need long-term care at some point. However, only 24% will need long-term care for more than two years.

So, if we're just talking about probabilities here, most folks need a plan to cover around $200,000 of long-term care expenses for a year or two2. That's not cheap, of course, but it's an expense that can be manageable if you and your fiduciary advisor start thinking about it sooner rather than later.

The best solution will depend on your specific situation. An older, single senior who's reached the "no-go" phase of retirement and isn't spending very much might be perfectly content to pay out of pocket for a nice private room in an assisted living facility.

On the other hand, what about someone who falls outside the averages? For example, married women tend to outlive their spouses. If your husband has a chronic health problem and spends more than the "average" two years in assisted living, that could seriously deplete the resources that a widow needs to cover basic expenses for the rest of her retirement.

3. What is long-term care insurance?

Each family has unique dynamics which leads them down their own personal decision-making process on whether to obtain long-term care insurance or to self-insure the risk. For the most part, today's policies cover in-home health care, and many even include life insurance that you can leave to a beneficiary.

But as folks have started to live longer and the costs of caring for seniors have gone up, premiums on the traditional policies have risen as well. As a result, a lot of insurance companies have stopped offering long-term care policies. The American Association of Long-Term Care Insurance says that in 2021, a 65-year-old couple buying a plan that covers $165,000 in base expenses with 5% of annual growth could pay nearly $10,000 per year.

Premiums on long-term care insurance plans are usually cheaper if you buy earlier. But is it worth it to pay years of premiums on coverage you might never use?

At Keen Wealth, we pride ourselves on helping clients crunch those numbers, review possible scenarios, and arrive at the best possible plan for their specific needs. Yes, averages and probabilities can be good guideposts. But our planning process puts you, your family, and your future ahead of the numbers.


1 Searched using Parkville, MO USA. 
2 Calculated by using Genworth calculator of $7,500 by 12 months= about $90,000 per year median cost for a private room in a nursing home facility around Parkville, MO. 


About Bill

Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.

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