Inflation may seem low, but there are several different rates, depending on what costs are being tracked. Gasoline has gone down in cost, food is going up in cost, the CPI (consumer price index) is going up slowly, and the costs of Long-Term Care services are going up faster.
Long-Term Care (LTC) costs have been going up 5% to 6% historically. The past 8-10 years the increases have been less due to the stagnant economy. Some people will take minimum wage jobs when nothing else is available. Most LTC costs are bricks and mortar as well as minimum wage labor.
There are a lot of workers at any LTC facility. Three shifts are needed to provide 24 hour awake care for the residents. Minimum wages are going up nationwide, in many place doubling or more. McDonald’s workers are picketing for $15.00 per hour minimum wages.
Now consider that purchasing LTC insurance in your 50’s means it may not be used for 30-35 years. That is why an automatic, built in inflation factor of 5% compound is absolutely necessary. Buying this type of insurance without that option will very possibly result in a benefit that is woefully inadequate when care is needed. This results in spending your savings down (which you were trying to avoid) to the Medicaid impoverishment level and ending up on a government handout.
At 5% compound, a bill costing $5000/month today will be $10,000 a month in 15 years, and $20,000 a month in 30 years. These numbers seem quite high, so let’s go back and see what history tells us has actually occurred. Thirty years ago the median price of a house was $80,300. Average monthly rent was $385. Potatoes were 5 pounds for a dollar, and a new Ford Mustang was $7452.
Yes, we have had inflation, and it will get worse. 10,000 baby boomers turn 65 every day in America. Very few of us had 12 children. There are simply not enough workers to care for all of us as we age and need assistance. What happens in any industry when not enough workers apply for the open jobs? Wages go up. I am getting direct mail pieces at my home addressed to resident asking me to please come work for an assisted living facility – no experience needed, they will provide training.
Thus, if you are considering LTC insurance – investigate with an expert in this field. Many seemingly unrelated thoughts need to be taken into consideration in order to choose appropriate coverage.
At TheLongTermCareGuy.com we have a combined 32 years of experience in helping people with LTC planning, 8 years for Kathy and 24 years for Romeo. Many attorneys and financial planners refer their clients to us for our expertise in this field.
If you want expert advice and appropriate suggestions for your situation, contact www.TheLongTermCareGuy.com at (920) 884-3030 or (800) 219-9203 to schedule a time to investigate.