The Actual Cost of Long-Term Care (and how to fund it)

Tamara Wallen | June 2021 | 2-minute read

There’s a fair amount of sticker shock when clients ask how much it costs to plan for a possible long-term care need. And compared to term insurance, a long-term care policy can seem expensive. But before we look at the cost of cover, we need to put things in perspective by starting with the cost of care.

According to Genworth’s Cost of Care Survey for 2020, the annual national median cost of care in 2020 ranged anywhere from $19,240 to $105,850, depending on your needs. Breaking that down to monthly costs, that’s between $1,603 - $8,821 a month to provide care for you or your loved one.

Annual National Median Costs 2020

Homemaker Services: $53,768
Home Health Aide: $54,912
Adult Day Health Care: $19,240
Assisted Living Facility: $51,600
Semi-Private Room in a Nursing Home: $93,075
Private Room in a Nursing Home: $105,850

So, now that we know how much care costs, we’re able to help our clients plan for it. IF there is an LTC event, where will the money come from? And how will an LTC need affect your client’s portfolio? More importantly, if they need care for an extended period, how much will be left for their spouse to live on (or even fund their own care)?

Funding an LTC Plan

Let’s look at the cost of having a plan in place. This could mean transferring risk to an insurance company or setting aside assets to self-fund a long-term care need.

We’ll start with transferring the risk. If a 55-year-old couple were to purchase a $4,500 monthly benefit, three-year policy adding inflation, the cost per year is right around $4870. That would total $146,100 if paid for 30 years. Yes, $146,100 sounds like a lot, but is it?

Since we wisely added inflation to the policy, our pool of money has grown to $393,217 per person! We spent $146,100 over 30 years to get $786,433 to spend on care.

Let’s look at another example. Take, for example, a 65-year-old married female in Texas. By repositioning $106,000 of her assets today, she can create a total pool of $284,268 in 20 years to spend on qualified long-term care expenses. And those benefits are tax-free.

If your clients are considering self-funding, you need to walk them through the numbers. Why would a client choose to use their own money when they could leverage it with insurance? Why pay full price when you can pay the discount amount? Do you self-insure your car? No, because why pay 100% of the costs if you don’t have to?!

And, let’s not forget: Self-funding means leaving not much, if anything, to loved ones left behind.

Long-term care planning is about so much more than just the cost and funding, but these are important topics that you need to be able to address with clients. For a more in-depth conversation around leveraging assets to fund LTC, Just Ask.

Use my calendar link to schedule a time that’s convenient for us to talk.

Source: Genworth 2020 Cost of Care Survey, conducted by CareScout®, June 2020

1 Based on 44 hours per week by 52 weeks 2 Based on 5 days per week by 52 weeks 3 Based on 12 months of care, private, one-bedroom 4 Based on 365 days of care (https://www.genworth.com/aging-and-you/finances/cost-of-care.html)