The U.S. is facing a geriatric explosion as tens of thousands of baby boomers reach the age of 65. As this cohort ages, with medical advances extending longevity, there will be a shifted focus on chronic illness. Although replacement, medication and lifestyle may alleviate the debility of many chronic illnesses, that may not prove so for many. Longevity has increased the incident of dementia and Alzheimer’s disease rendering custodial care service for an increasing number of aging seniors. When the probability of occurrence is uncertain and the risk of financial loss is great, people often look at transferring that risk thru insurance coverage. Yet, few own these polices. Affordability is the primary reason. The secondary reason is the denial of future need or cost of custodial or nursing home care. Avoiding this issue can be problematic. When working with pre-retirees engaging in retirement planning, I stress the need to include a future cost of custodial care (LTC) in their retirement savings projections. Those with high net worth have the financial ability to self-insure against the probability and cost of custodial long-term care costs, leaving all other pre-retirees with the challenge of figuring out how to address this scenario before it happens. The need for custodial care begins with assistance for house cleaning and yard maintenance, then it grows to include addressing financial responsibilities, running errands, driving to doctor appointments, cooking and taking medication. The national median cost of home health services for 2017 was $21.50 per hour. Using a six-hour day of care for 52 weeks, that equates to nearly $48k/yr. In Georgia, the median cost is $18 per hour. This is on top of rent, utilities, OOP health care costs, etc. Commonplace to our families today, siblings and parents are scattered about; hence a growing number of elderly find themselves alone. So, if retirees wish to maintain independence in their elder years, either in their own residence or in an assisted living apartment, they must have the funds to pay the cost of custodial care, memory care and perhaps even nursing home care.
Here is a common scenario. A 75 year old wife is trying to manage the care of her 81 year old husband who needs help with daily personal tasks. She can’t manage this; physically or emotionally. They decide to sell their big family home that they had been clinging to even as costly repairs were draining their savings. They move into an apartment. Then tragedy hits. The wife was in a head-on collision and spent 10 weeks in ICU. The husband needed to hire immediate p/t care for himself. The wife was released under his care. Now they needed 24 hour care to help in all aspects of daily living including taking medications. It was just a matter of months before that situation became too costly coupled with being uncomfortable with so many caretakers, so they moved into an Assisted Living Center. Ironically, at $9500 month, living in an ALC was less expensive than hiring caregivers to come to the apartment. The cost for care kicks up several notches when caretaking requires medical assistance under a doctor’s watch in a nursing home center. The U.S. Dept of Health & Human Services indicate a 40% chance of entering a nursing home. Of those who enter, most pass within 20 months. Other residents stay longer. I share this not to frighten the aging retiree of today, but to encourage retirees of tomorrow, who will be living longer lives than the elderly of today, the necessity to begin planning today for tomorrow’s needs.
