What You Need to Know About Long-Term Care

As retirees live longer, many worry about outliving their savings. However, many older Americans have not planned for a looming expense: the cost of long-term care.

The median cost of a private room in a nursing home was $105,850, and in-home care costs were $53,768 to $54,912 annually, according to Genworth’s 2020 Cost of Care Survey. These costs vary by location.

Although it is hard to predict a retiree’s needs, the chances of requiring some type of long-term care services are high, about 70% for the average 65-year-old. Men typically need 2.2 years of care, and women may require 3.7 years.

Long-Term Care Insurance

Long-term care insurance may cover all or a portion of services. The premiums depend on someone’s age, gender, health, location and more. However, there is a 50% chance someone will not ever need their policy, the American Association for Long-Term Care Insurance estimates, and premium hikes can be costly. Premiums typically increase about 5% every five years.

Hybrid Policies

A hybrid policy is another option. These policies are part life insurance or an annuity and part long-term coverage. Seniors can buy a policy with an upfront payment, eliminating the risk of future premium increases and their heirs may receive a death benefit if they do not need long-term care. However, it may be harder to compare prices for a hybrid long-term policy than standalone long-term care coverage.

Medicaid

Low-income retirees with assets below certain thresholds may be eligible for long-term care services through Medicaid.

President Joe Biden called for $400 billion in Medicaid funding for home and community-based care as part of the American Jobs Plan, and separately, House and Senate Democrats introduced bills supporting Biden’s agenda in June.

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