Many boomers greatly underestimate the costs of LTC services, but that is not the dangerous part. It seems many do not take inflation seriously, compounding the problem greatly.
I remember $0.29 regular gasoline and $0.32 premium (per gallon). You could buy a new 1977 Ford Maverick for $1995.00. Remember when coffee only cost a quarter a cup? Yes, things cost less money years ago, and will cost much more in the future.
Even the various charts available today on the cost of nursing facilities give base rates, what you might pay if you simply went there to live. If you need help with day to day activities the bill is a bit higher. Nursing homes in many parts of the country now run $8000 to $8500 a month, assisted living or CBRF facilities are half of that, which is still a significant drain on a person’s savings. If the money comes from the IRA or 401K and taxes must be paid first, it can cost $150,000 to cover a year in a nursing home.
Long term care costs have been increasing at a rate of 5% to 6% a year over the past 20 years. This will not continue due to the shortage of workers for these facilities. What happens in any industry when sufficient workers cannot be found? That’s right, wages increase until enough workers apply for those positions. The labor costs of LTC will be accelerating, not slowing.
If you are 60 today, and need a nursing home at 85, you can expect to be paying $27,000 to $29,000 a month, assuming only 5% per year increases in the cost of care. If you have a $500,000 IRA account and plan to withdraw from it in retirement, how much will be left at age 85 to pay for care (and taxes)? You will be looking at an annual bill of $324,000, before taxes, and how much will you have left at that point to pay the bill.
If you think the federal government will be able to pay for all the baby boomers’ care, you are an optimist for sure. Medicaid, the fall back program of last resort does not and will not have the money for all of us. My LTC insurance policy has a benefit that automatically increases what it will pay every year by 5% compound – built in. I will not sell one without that feature and you should not even consider buying one without that. A 60 year old couple can buy one like this for just the interest on part of their savings account. It does not need to affect their life style, buying a new car, taking a vacation, or going out for dinner on Saturday night.
The biggest bill we face in retirement is not medical care related, Medicare and your suplement take care of that. It’s typically not the casino or the cruise ship either, its when your health changes and you need care with activities of daily living. Without the LTC insurance policy I have, I would be quickly bankrupted, and you will too. Don’t wait til 60 as many of us are no longer elligible to purchase one by then, you need to investigate this in your 50’s while still healthy. All it takes in arthritis, bone density trouble, a bad knee, blood sugar readings out of the normal range, etc., etc., etc., to eliminate your options. Visit www.TheLongTermCareGuy.com and contact me, Romeo Raabe The Long Term Care Guy at 920 884-3030 or 800 219-9203 to investigate this coverage for yourself.