Should you ever require help with life’s basic activities — eating, dressing and bathing — one thing is true: It will be expensive.
The median monthly cost of an in-home health aide is $3,861, according to Genworth Financial. The monthly cost of a private room at a nursing home is $7,698, and it’s $3,628 for an assisted-living facility.
Many federal workers and retirees face a tough decision. With today’s deadline and a hefty premium increase looming, they have to determine how much coverage they can afford to keep under the Federal Long-Term Care Insurance Program. The premium spike has enraged a lot of people.
I talked to several financial planners about growing fears over the rising cost of coverage. All cautioned people to put into perspective the premiums they’ve paid compared to what they could ultimately pay out of pocket if they don’t have the insurance.
Lanta Evans-Motte, a Maryland-based financial adviser with Raymond James Financial Services, said that about 70 percent of Americans over age 65 will need long-term care services for an average of three years, according to Department of Health and Human Services estimates.
“Most policyholders should probably attempt to keep their policy in place with as much coverage as they can afford, while assuming some type of premium increase every five or six years,” Evans-Motte said. “They may need to reduce expenses in other areas of their household.”
For federal workers and retirees who cannot afford the top amount, lowering the automatic compound inflation option, or ACIO, along with reducing the coverage term and daily benefit may be viable options, according to Evans-Motte.
As you consider your choices, take into account your family’s health history. If “Alzheimer’s or dementia runs in your family, a longer benefit period may be appropriate,” she said. Even with the insurance, you’ll still need some savings. Policy benefits only kick in after 90 days.
Selecting an option with a lower inflation premium may make sense for older people. But that option is more risky for younger people. The inflation protection is a hedge against future health care costs, Evans-Motte said.
I asked Carolyn McClanahan, a physician turned certified financial planner, to weigh in on the dilemma people are facing. McClanahan, who founded the Florida-based Life Planning Partners, concentrates on how health intersects with personal finance. She does not sell long-term care insurance.
Here’s her advice for one of my readers. The background: The husband will soon be 74 and is still employed full time with the federal government earning $125,000 a year. He’ll get a pension under the Civil Service Retirement System. He has Type 2 diabetes and arthritis. The wife is 72 and a retired state government employee with a small pension. She has congestive heart failure, but it’s under control.
The couple have about $42,000 plus two IRAs worth just under $100,000. The couple have been helping with expenses for their grandchildren.
If they accept the increase and maintain their current benefits, their monthly premiums will go from $340.18 to $768.22. As long as the husband keeps working, they can afford to pay the increase to retain five years of coverage with a daily benefit of $267.
McClanahan suggested — given the income and savings the couple will have in retirement, and factoring in age and health — they have the resources to partially cover the costs of long-term care out of pocket.
Michelle Singletary welcomes comments and column ideas. Reach her in care of The Washington Post, 1150 15th St. N.W., Washington, DC 20071; or singletarym@washpost.com.
