We all have an idyllic vision of our golden years. We all want to be in good health and living self-sufficiently in our own home.
But that scenario is likely to not pan out for most. On average, nearly 70% of 65-year-olds will eventually need some form of long-term care, according to the Department of Health & Human Services. And HHS estimates 20% will need it for more than five years. So it pays to prepare financially.
"Not enough people have some plan in place," said Jamie Hopkins of the retirement program at The American College. "It's a lot of self-funding and relying on family members and Medicaid."
Here are some factors to consider when preparing for long-term care:
Know the options: Long-term care is generally defined as services someone may need to handle basic, daily activities, or rehabilitation beyond 90 days. Such services are typically provided at an assisted-living facility, at home with the aid of a caregiver, or in a nursing home.
Assisted-living facilities generally don't accept Medicare and Medicaid. Nursing homes generally have the broadest services, including 24-hour supervision. They're primarily paid for by Medicare.
Consider costs: Long-term care costs hinge on the type of services provided and where.
A private room in a nursing home cost an average $6,965 a month in 2010, according to HHS. A semiprivate room: about $6,235 per month. A month of care in a one-bedroom apartment at an assisted-living facility: $3,293 a month.
Keep in mind women need long-term care about 3.7 years, on average; men need about 2.2 years.
Medicare, Medicaid: Once you're 65, you may be able to get some of your long-term care costs paid for by Medicare and possibly Medicaid. There are key differences.
Medicare will pay if your doctor prescribes rehabilitation or other skilled services. Medi-caid, which is administered by each state somewhat differently, covers more services, but one must meet income and asset requirements. The government will look at finances going back five years.
Decide how to pay: Generally, there are three options: Savings, insurance coverage or Medicaid and Medicare. Experts suggest using a combination that best suits your needs.
It might be worth looking into long-term care insurance, which reimburses policyholders a set amount to cover costs.
Another option is to convert a life insurance policy into a long-term care plan. This basically means selling your policy to a company that will pay out between 30 percent and 60 percent of the full benefit when you need long-term care.
Start early: The best time to start preparing is while you're in your late 40s-to-mid 50s. "Mid-50s is probably the sweet spot ... because there are a lot of people still eligible for long-term care insurance," Hopkins said. "What happens in your 60s and 70s is people start worrying about this and they become uninsurable."
For more information, contact Spring Arbor.
The Post and Courier