We’ve read plenty of articles in recent years concerning long-term care costs, and we’ve shared several of these reports here on the AgingOptions blog. Most of these reports seem to presume that the majority of retirees will be facing their care needs and related decisions as a couple. But this recent Kiplinger article by financial planner Michael Aloi makes an important point. Since women outlive men, women should be paying special attention to long-term care issues, since they might be facing these decisions – and costs – on their own.
Frankly, we didn’t find Aloi’s article particularly insightful. But we’re sharing it because its underlying message is clear: whether married, single, or widowed, women need careful retirement planning.
Women Face Unique Aging-Related Challenges
“Women face unique challenges as they age,” Aloi begins. Recent population data suggests that U.S. women outlive men by an average of 5 years. “Living longer means planning for a longer retirement,” the Kiplinger article continues. “That sounds good, but a longer retirement increases the odds of needing long-term care.” Data from Morningstar says women make up at least 70 percent of U.S. nursing home residents. The average age of admission for long-term care is 80, and women will need care for an average of 2.5 years.
“Living longer also increases the odds of going it alone, as living longer may mean outliving a spouse,” says Kiplinger. Aloi quotes a Harvard study showing that, in 2018, women comprised three-fourths of solo heads of households among those 80 and older.
All these stats add up to one thing, Aloi writes: women need to be doing a lot more thinking and planning about how to handle long-term care.
The First Challenge: How to Afford Long-Term Care
The Morningstar report cited above says that some form of care is in the future for most of us: 52 percent of people turning 65 will require some type of long-term care services in their lifetimes. For women the figure is nearly 60 percent – again since women outlive men. (Other statistics put the actual number closer to 70 percent.) Roughly one-third of those 65-year-olds will need nursing care, not just in -home care. The problem is the expense.
“Long-term care is costly,” writes Aloi, and that’s a colossal understatement. The authoritative Genworth Cost of Care Survey for 2020 says that the average private room at a nursing care facility costs almost $11,000 per month here in Washington State, the home of AgingOptions. The monthly cost of a home health aide for 5 hours each day, 7 days a week, is just under $4,800. Assisted living will set the resident back $5,750 per month.
According to Genworth, paying for care involves limited options. People with means can self-fund, paying for care out of pocket. On the other end of the income spectrum, people can qualify for assistance under Medicaid or through the Veterans Administration. Sometimes family members will step up and assist with care costs. Finally, there’s insurance. A few years ago, AARP reported that only about 7.2 million Americans have traditional long-term care insurance: however, there are other policies now available that combine life insurance with LTC benefits. Some annuities can be purchased in a way that helps fund long-term care.
Medicare and Medicaid Benefit Millions – but There Are Downsides
In the Kiplinger article, Aloi describes the government programs that many are counting on as their safety net. “Medicare may cover some long-term care expenses, but only for the first 100 days [following hospitalization],” he writes – a fact that surprises some people. “Medicare does not pay for custodial care – at home long-term care. Medicaid pays for long-term care, but you must qualify financially. Spending down an estate to qualify for Medicaid is one way to pay for long-term care, but it’s not ideal in my opinion.”
Another growing problem is the scarcity of Medicaid beds. Most long-term care facilities have a limited number of Medicaid beds available, and here in the Pacific Northwest some providers, frustrated by the gap between cost of care and government reimbursement, have left skilled nursing entirely. “The risk the facility you want is not available for Medicaid recipients looms large,” Aloi warns.
Regardless of your gender, before you conclude that Medicaid is your only option, you need to sit down with experts who can help you map out alternatives. If you have time on your side and the resources available, now is the time to start planning, says Kiplinger. Tools like a safe harbor trust for married couples can protect resources and provide far better care options. And whatever your situation, a financial dashboard is an absolutely essential planning tool.
A Financial Dashboard Helps You Run the Retirement Projections
In his Kiplinger article, Aloi seems to agree with our recommendation, although he uses different terminology. He likens the planning process to using your navigation system when driving. “The first step when mapping out a road trip on a GPS is to enter in your starting and destination point,” he writes. “It’s the same with retirement and long-term care planning.”
He starts with what he calls an ideal retirement situation, and then runs a series of “what-if” scenarios to see how the client’s outlook appears under a variety of assumptions about interest rates, savings rates, inflation and so on. This is extremely helpful for women, who are statistically more likely to age as singles after the death of their husbands. He employs a stress test, just as we recommend, so the client is better prepared for any eventuality.
The point of the article is well-taken. Women tend to outlive men. They’re more likely to live alone and to need long-term care one day. The time to start planning for the future is today.
My Life, My Plan, My Way: Get Started on the Path to Retirement Success
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(originally reported at www.kiplinger.com)