Many aging Americans are unprepared for the costs associated with long-term care. An assisted living community can easily cost as much per month as the mortgage for a home, which can drain retirement nest eggs faster than one might think.
Preparing for the unexpected is an important part of retirement planning. Read more about assisted living costs and see our tips on building better financial strategies for your retirement.
Being Realistic About Assisted Living Costs
The majority of baby boomers are unaware of what their long-term care needs will be, how much they will cost or how they will pay for them, according to a new AARP poll.
Preparing for the unexpected is an important piece of your retirement planning. Paul Merriman, an advisor and financial educator, discusses why it’s important to “hope for the best, but prepare for the worst” when it comes to retirement:
“Most financial experts say that you need to save no less than 10% of each paycheck — and some say you should save 20%. Retirement planning has never been more important as retirement costs are more expensive than people think; especially healthcare and long-term care costs. People are saving about 50% less than they were 40 years ago. If we don’t teach people as much about saving as investing, they’re not going to be financially prepared for the last third of their life.”
Sadly, the majority of boomers have not financially prepared for retirement, which is putting an economic burden on the government.
The reality is that no one can predict life’s unknowns like accidents, illnesses or unemployment. Each of these factors contributes to retirement well-being and even if you think you’ll be healthy and live in your family home until death, chances are there will be some surprises.
Here are a few other facts about assisted living costs to consider:
- Assisted living costs aren’t covered by Medicare, so planning ahead is crucial.
- Depending on amenities and location, downsizing doesn’t always mean lower expenses.
- While most retirees want to stay in their homes, 70% of seniors will need long-term care at some point.
Long-term care is a hefty retirement expense that should be addressed during proactive retirement planning.
Building Better Financial Strategies for Long-Term Care
Long-term care can cost a family upwards of $6,000 a month, depending on the care and the location that the care is needed. The 2017 Genworth Cost of Care Survey says that the national median cost for assisted living is $3,750 per month, which adds up to $45,000 a year. In some locations, the cost is as much as $5,000 and more a month, depending on care needs.
It’s very important you take measures to save for this care and do your due-diligence to inform your family of what care option is right for you (whether it’s an assisted living community, continuing care or in-home care). If you find a place ahead of time you may even be able to take advantage of special rates.
When planning for health care in retirement, it is important to include the possibility of these needs into your long-term plan. An expert financial advisor can help you forecast retirement health care expenses so you can build them into financial planning strategies.
Is your family prepared for assisted living costs? What obstacles have you encountered and what has your experience been like? Share your stories with us in the comments below.
