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Long Term Care Has Become a Fact of Life

Will you need long term care?

Modern Medicine, along with a smart lifestyle, is allowing for an extending life expectancy. The U.S. Department of Health and Human Services is now saying that 70% of people over age 65 will need Long-Term Care services at some point in their life. 

The daunting question is, how will it be paid for? 

I have worked with thousands of families addressing this question over the past 20 years. It is easy to boil down: 

  1. Medicare is limited to rehabilitation.
  2. Medicaid forces a stay in a nursing home
  3. Caregiving by family members runs its course in a short time.
  4. People dislike the high cost of traditional long-term care insurance.
  5. Unfortunately, the VA does not generate enough aid and attendance to solve most problems.
  6. Most of the time, the family pulls out their checkbook or start liquidating a bank or investment account. 

Most families end up at number #6 with a brief stint with Medicare and family caregivers. 

The Problem: 70% of people over 65 will need long-term care and will be going to their retirement savings to pay for it. So how much does one need? Before we answer those questions, let's face a simple fact, COVID has changed everything. This means care in the home is what most people want and prefer. Suppose home care becomes the substitute for Assisted living (2.5 years) and nursing homes (2.3 years). Most individuals will budget at least three years of compromised health that requires long-term care services. 

This leads us back to the question: 

How Much does one need to budget to pay for long-term care in the home if they had their choice? 

Average Need                                                                    1,000 days

Average daily need (8 hours a day)                         8,000 Hours

Cost per hour (licensed and bonded)                    $21.00 Hour

Inflation                                                                                  02.33%

Estimated exposure                                                          $188,270.00 or  $62,756.00 year 

So, which bucket of funds will use? A majority of the time it is a person's IRA. This compounds the problem because this is qualified money (before tax). Tax brackets for $80-160,000.00 in income could be 22-24%  

Before-tax could be                                                         $80,467.00 per year 

What should a person do?  People are flocking to Asset Based Long-Term as the solution or a substitute for private pay.

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