Planning for Long-Term Care
This calculator can be used to derive an estimate of the future cost of long-term care. The calculator needs a total of five inputs from the user, including:
- The daily cost of a long-term care facility such as a nursing home. Since the duration of a stay is unknown, costs are typically stated on a per day basis
- The number of years long-term care may be needed. Statistically, the average stay in a long-term care facility is 2.5 years
- Any funding that has been earmarked to pay for long-term care (LTC)
- The annual increase in the cost of LTC. Recent statistics indicate these costs have risen by about 5.1% per year
The calculator then provides the user with three outputs:
- An estimate of the total funds needed for long-term care
- The current funds set aside to pay for this expense
- Any current funding gap, which is found by subtracting the current funds from the total funding estimate
Nursing home and long-term care needs
According to statistics gathered by AARP (formerly known as the American Association of Retired Persons), around 58% of women over the age of 65 and older will require some form of long-term care during their lifetime, while around 47% of men aged 65 and older will require this service. Generally, the term long-term care can refer to any service designed to meet someone’s medical or personal care needs. Such services can help individuals live both independently and safely when they are no longer capable of performing everyday activities on their own.
While some people tend to associate long-term care only with medical services, most of this support involves help with personal tasks elderly people are faced with every day including bathing, dressing, using a toilet, transferring from a bed to a wheelchair, eating, as well as cleaning up after meals. These services can also extend into indirect care activities such as housecleaning, managing a home’s finances / paying bills, shopping for groceries / clothing, caring for a pet, and even responding to in-home emergencies such as an activated smoke detector or a fire alarm.
One of the common misunderstandings in this area involves the availability of fund for long-term care via public programs. For example, in the United States Medicare will pay for skilled services or if rehabilitative care is needed. However, services such as nursing home care is only covered for a maximum number of days (around 100). The Medicaid program in the United States will pay for long-term care, but only after meeting income and asset requirements, which means the person receiving this care must have both very few assets and little income.
So, while some people may qualify for one of these public programs, most people create plans involving a variety of payment options including long-term care insurance, sources of personal income such as pensions, savings accounts, life insurance proceeds, annuities, and ever reverse mortgages. The estimates provided by this calculator can help you to better understand how much long-term care can cost, allowing you to create a plan to close any potential funding gap you may have in your plan.