With so many unknowns about potential care needs in the future, it can be easy to backburner planning. This can be a costly mistake, as proactive choices made now may help protect finances in the future.
Understanding the progression and funding of care as you age is a crucial component of planning. While it may be disconcerting to consider a long-term care event like Alzheimer’s, dementia or other forms of cognitive decline, failure to do so can make matters exponentially worse, putting an unfair burden upon heirs and loved ones as well as putting assets at risk.
Planning for care at home
The majority of older Americans prefer to age in place, and home health care is often the first choice of care for these people. Indeed, today most in-home care is delivered by family members or nonprofits. This model may bring added flexibility and help managing expenses, especially early on in a progression of care.
RBC Wealth Management-U.S. recently commissioned a study of those caring for people affected by cognitive decline. The study found what women in the trenches of caregiving already know: it brings more significant trade-offs for them than men in terms of career disruption and sacrificed personal time. In fact, two-thirds of the primary unpaid caregivers of those with cognitive decline are female.
While more cost-effective than institutional care, home health care can raise further concerns. In addition to limitations in medical training, providing care can present family dynamic challenges between those who provide care for family and those who do not; impact careers when time away from work is required to care for family; stress relationships with the additional burden of reprioritizing commitments; and lay an emotional burden on caregivers.
There are also impacts on the care receiver. For many, the thought of becoming a burden on family in their later years is unsettling.
Of 65-year-olds will need some form of long-term care2
National annual median cost for a semi-private room in a nursing home
Length of average nursing home stay
Several planning alternatives have emerged, offering hybrid services that blur the lines between home care and nursing homes. These include a flexible array of offerings like skilled nursing visits, short-term nursing home stays for acute care, independent living and assisted living.
The key with a hybrid plan is active case management, including understanding the needs of the care receiver and finding a cost-effective method for delivering their care.
Nursing home care
For many, the thought of a long-term care event brings to mind a prolonged stay in a skilled nursing facility. This residential option offers patients health and personal care delivered in a medical setting by licensed nurses and support staff. This high-touch model comes at a significant expense, however, and long-term stays are not funded by Medicare.
Self-funding: individuals who do not have a plan to address long-term care costs default to self-funding, where assets are required to be liquidated to cover the costs. Yet with this option it’s important to understand both potential costs and potential risks to your financial goals and the impact on your family.
Traditional or hybrid insurance: Another option may be to purchase insurance coverage. These policies can help fund your care and protect assets, but costs vary and this may represent an expensive choice depending on your age and health.
Medicaid: The federal government offers Medicaid as a safety net for those with fewer assets and few other options, making Medicaid a last resort for most individuals.
Another proactive step is to determine your advanced care wishes, such as identifying who should make medical and financial decisions for you when you are no longer able to do so. This requires legally establishing a health care directive and a power of attorney. These documents provide direction on who will make these decisions, in addition to when and under what circumstances these decisions will be made. Ensure these documents are reviewed on a regular basis and kept current. Keep in mind that you do not need to name the same individual to handle your personal medical decisions and your financial decisions.
Where you spend your golden years is likely to change as you age, moving along a continuum of care options. Finding the right fit at each stage requires understanding the choices and impacts on your quality of life and care.
Aging in place
Even as independent and senior living facilities are booming, more and more people are choosing to stay in their homes and “age in place” for as long as possible.
Most seniors prefer to stay in their homes5
if they could no longer live on their own
While costs are certainly a consideration for many, others who choose to age in place may be simply taking advantage of flexible care and service options. Increasingly our service economy has scaled to meet the needs of our nation’s aging population.
Health care, dining and transportation services, along with innovations in technology and safety, have increased independence and offer options to keep seniors living active and healthy lives in their homes.
While your retirement journey often begins in your current home, your evolving needs are likely to drive change over time.
Today’s seniors have a variety of choices when exploring new options, from independent senior living, shared living and assisted living all the way to skilled nursing facilities.
Identifying the right option at each stage requires recognizing how your needs are changing and balancing considerations like level of care, personal preference and costs.
Staying in a single-family dwelling can be a fit for seniors in good health who are still independent and seek a cost-effective solution. However, even a plan to stay in a home or townhome may require some accommodations. A few of the more popular items include:
- Singe-level living
- Safety amenities like a walk-in bathtub, handrails or larger doorways
- Home maintenance services such as lawn/snow service or meal service
- A shift in geography closer to family and friends or better health systems
Independent or assisted living community
As you age you may find that you prefer help with day-to-day tasks like preparing meals, laundry or housekeeping. Eventually, you may even require personal services like help with bathing and dressing.
Today’s senior living communities offer options that can adapt as your needs change, as well as deliver social outlets and structure to keep you active and engaged.
Costs are largely impacted by the size of residence and assistance required, but typical expenses are $1,500 to $4,000 per month, with dementia or Alzheimer’s care offered at a significant premium above these rates.6
Long-term care facility or nursing home
A nursing home offers the highest level of care – and with it, the largest price tag.
Stays at a nursing home can involve short-term issues like rehabilitation following a fall, or treatment for chronic and complex conditions, memory care, or end-of-life services.
Care is delivered by licensed nurses available around the clock, with most facilities offering special memory care units for those with dementia and Alzheimer’s. Costs range from around $4,000 to $8,000 per month.6
- Understand your options, and build a care plan before an event occurs
- Carefully consider the impacts of your decision beyond finances, to include family dynamics level of care and quality of life
- Be proactive in addressing financial risks and your potential incapacitation
Read more from our RBC Wealth Insights reports Taking control of health care in retirement and Preparing for the expected: The financial impact of cognitive decline.
1. Caregiver Statistics: Demographics, Family Caregivers Alliance & AARP, 2015.
2. Longtermcare.gov, U.S. Department of Health & Human Services, 2017.
3. Cost of Care Study, Genworth, 2016.
4. Cost of Care Study, Genworth, 2015.
5. Smaller Share of Women Ages 65 and Older Are Living Alone, Pew Research, 2014.
6. Senior Housing 101: Senior Care Types Explained, A Place for Mom, 2015.
RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC.