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The Shocking Cost of Long-Term Care -- and How to Tackle It

By Maurie Backman - Jan 29, 2020 at 8:48AM

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Long-term care probably costs more than you think.

Healthcare is a major expense for retirees, but all of those prescription copays and Medicare Part B deductibles might pale in comparison with the price tag attached to long-term care. It's estimated that 70% of seniors 65 and over will require some amount of long-term care in their lifetime. For some, that could mean a few visits a week from a home health aide. For others, it could mean spending years in a nursing home. And if you don't plan ahead for that eventual expense, it could easily wind up bankrupting you.

The high price of long-term care

Seniors are generally on their own when it comes to paying for long-term, since it's not a service covered by Medicare. The reason? Medicare will only pay for medical-related services, such as those needed to help you recover from an injury, illness, or procedure. For example, if you're admitted to the hospital and then need a few weeks at a skilled nursing facility to complete your recuperation, Medicare will generally pick up the tab. But if you need help getting dressed in the morning not because you've been injured, but because you're falling victim to the symptoms of old age, then it won't step in. Rather, you'll be forced to pay for that care yourself.

Man in bathrobe sitting on bed holding onto walker

IMAGE SOURCE: GETTY IMAGES.

So just how much money are you looking at for long-term care? Here's a breakdown of what some common services will cost you, based on 2019 data from Genworth:

Long-Term Care Service

Average Annual Cost Nationwide

Assisted living facility

$48,612

Home health aide

$52,624

Shared nursing home room

$90,155

Private nursing home room

$102,200

Data source: Genworth.

To be clear, these are only averages. In many parts of the country, you'll pay a lot more. That's why it's crucial to come up with a plan for covering long-term care costs ahead of your senior years -- before that expense creeps up on you.

Paying for long-term care

You have a few options when it comes to affording the whopping expense that is long-term care. First, you can pad your retirement savings as much as possible. IRA contribution limits currently max out at $6,000 a year for workers under 50, and $7,000 a year for those 50 and over. With a 401(k), you get even more leeway to fund your savings: Workers under 50 can put in up to $19,500 annually, while those 50 and over get a $26,000 cap on contributions. The more money you put into your savings while you're working, the more funds you'll have available should the need to pay for long-term care arise.

Next, you can contribute to a health savings account, or HSA, and carry unused funds into retirement, at which point you can take withdrawals to pay for long-term care. Annual HSA contributions currently max out at $3,550 a year for those who save on their own behalf, or $7,100 for those saving on behalf of a family. And workers 55 and older get an additional $1,000 per year to contribute. Because HSA funds never expire, these accounts are an extremely effective means of saving for future healthcare costs, long-term care included, in a tax-efficient manner.

Finally, you can purchase long-term care insurance. Having a policy to pick up a large chunk of your costs could prove invaluable where you're facing hefty bills at a stage of life when boosting your income by working isn't at all feasible. The best time to apply for long-term care insurance is during your 50s, but many seniors get approved in their 60s as well. And while those premiums generally don't come cheap, you can use funds from your HSA to cover them.

Long-term care is an expense many seniors inevitably wind up facing. If you want to avoid a scenario where you're forced into dire financial straits because of it, do your best to save for it in advance. It'll give you, and the people who care about you the most, one less thing to worry about in the future.

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