Nursing Homes Cost About $75,000 a Year*
You Don’t Need an Additional $75,000
1 in 2 Americans age 65 can expect to spend at least 1 year in a nursing home.
If you’re in a nursing home
- That $75,000 covers all your living expenses.
- Social Security, pensions, and other continuing income will cover at least part of the cost.
To cover the additional cost, you have 3 options
- Use your savings or cash from your house.
- Buy insurance.
- Go on Medicaid.
* Costs vary widely from state to state. Source: MetLife Mature Market Institute. 2010. Market Survey of Long-Term Care Costs. Click HERE for a useful tool on costs in your state from Genworth Financial.
Should You Pay Out-Of-Pocket?
Should You Use Reserves or Your House?
Long-term care could require hundreds of thousands of dollars, depending on the additional cost and number of years needed.
- If you are single and own your home, you could sell it should you need to move into a nursing home.
- It’s more complicated for couples. If one spouse needs moderate care, the other can often provide it. But should that spouse need nursing home care, the other still needs a home to live in and much of their income for current expenses.
Should You Buy Insurance?
Less than 15% Have Long-Term Care Insurance
You can buy private long-term care insurance to help cover the cost.
- Premiums are about $200 a month per person for a policy bought at age 65 that pays up to $60,000 a year.*
- But you could be charged a higher or lower amount, based on your medical history, state of residence, and other factors.
- And your premiums could rise in the future, if the insurance company’s costs are more than expected.
* National Clearinghouse for Long-Term Care Information, “Long-Term Care Insurance Costs and Receiving Benefits,” Washington, DC.
Should You Rely on Medicaid?
This is What Most People Do
Medicaid, the state-run government program for those with “limited means,” does cover long-term care — for those with limited means.
- If you are willing to exhaust your “means” should you need to enter a nursing home, usually at the end of life, you don’t need to hold savings or your house in reserve or buy long-term care insurance.
- If married, many states also allow a spouse to keep the house + about $100,000, should you or your spouse need care.
- If you only rely on Medicaid, your nursing home options could be significantly limited.
- Once in a home, however, most will accept Medicaid payments should you run out of funds.
Make a Plan
To Address the Risk of Needing Long-Term Care
Until you do, it’s hard to make a retirement plan.
Long-term care in a nursing home is the only significant expense you’ll likely face down the road. So to plan for retirement, you need to decide
- Will you buy insurance? If so, you need more income to pay the monthly cost.
- Will you rely on savings and home equity? If so, how much do you need in reserve?
- Will you rely on Medicaid? If so, how might you protect your spouse (if married)?
Only then can you figure out a retirement income plan – how to use your savings and house to get the monthly income you need, not just now but for the rest of your life.
So make a plan, and do it now. If you put it off, you’ll likely put it off again. And if you don’t make a plan you
- Might not afford the care you want.
- Deplete the savings you or your spouse will need down the road.
- Hold more than you need in reserve and live on less than you otherwise could.