With today’s increased life expectancy, it is possible that you could live a much longer life than your parents and grandparents. But those additional years may not necessarily be spent in good health.
As we get older, we tend to require more health-related care, which can range from 24-hour skilled nursing services to occasional assistance with everyday activities like cooking and paying bills.
One health condition that has increased dramatically, and will continue to grow, is dementia. Although this disease often starts out slowly, it can become much more debilitating over time, and the necessary care can be extremely costly. So even if you are currently in good health, it is important to plan ahead financially.
The Odds of Developing Dementia
According to the Alzheimer’s Association, 5.8 million Americans age 65 and older are living with Alzheimer’s dementia in 2020. This equates to roughly 1 in 10 people in this age group, and this figure is expected to grow to nearly 14 million by the year 2050.
Dementia doesn’t only affect those who are older, though. While many people start to show signs of Alzheimer’s in their mid-60s, the early onset of this disease sometimes occurs in your 30s. The chances of developing dementia also double every five years going forward. So your odds of contracting Alzheimer’s dementia are higher than you think, particularly if you are in one or more of the following categories:
• Female. Nearly two-thirds of Americans who have Alzheimer’s disease are women.
• African American. Older African Americans are approximately twice as likely to have Alzheimer’s or other types of dementia.
• Hispanic. Those of Hispanic descent are around 50 percent more likely to have this condition.
Many health conditions like dementia can impact family and friends as well, so even if you aren’t the patient, you may need to provide care for a loved one who is. This role not only requires a great deal of time, but it can also be costly from a financial standpoint.
Planning for the Cost of Care
Long-term care services are expensive, particularly when someone requires regular cognitive assistance (or “memory care”) either at home or in a care facility. According to Genworth’s 2020 Cost of Care Survey, the average price for just one month in a private room at a skilled-nursing facility is more than $8,500. The cost of a semi-private room is approximately $1,000 less per month, but that still equates to over $90,000 per year.
Home care is often less expensive, depending on how much and how often care is needed. Even so, the average price (in 2020) of a non-medical home health aide is more than $4,200 per month. So without a plan in place, the cost of Alzheimer’s care can quickly deplete your savings.
You Can’t Rely on Medicare
Many people believe that Medicare will pick up the cost of Alzheimer’s care and other long-term conditions. Unfortunately, that is a misconception. In fact, Medicare pays very little for dementia care and other long-term conditions.
One reason for this is because your health condition must be considered “recuperative.” Unfortunately, that’s not typically the case with Alzheimer’s. However, there are other treatable conditions that also cause memory loss, such as strokes and tumors, as well as a vitamin deficiency or a reaction to certain medications.
Even if you do qualify for Medicare coverage, you could still find yourself paying out a hefty sum for deductibles and coinsurance. For instance, if you are covered under Original Medicare (Medicare Part A and B), your portion of the price tag (in 2020) could be:
Even if you have built up a sizable nest egg, the cost of a long-term care need could quickly deplete everything you’ve worked so hard to save. On top of that, if symptoms are such that you are no longer able to work and earn an income, the overall cost can compound exponentially.
Insurance Options to Consider
Stand-Alone Long-Term Care Insurance:
Some insurance companies offer individual long-term care coverage that will pay for some or all care that is received in a facility or at home. While these plans can certainly offer a safety net, it is possible that you could pay premiums into the policy for many years but never use the benefits.
Hybrid Insurance or Annuity Coverage:
Unlike the “use it or lose it” concept of stand-alone long-term care insurance, a “hybrid” plan could provide you with much more flexibility. It can also offer benefits regardless of whether or not you or your loved one ever needs physical or cognitive care.
For example, a combination life insurance and a long-term care plan can pay out a monthly amount from the cash value to use toward nursing home or home health care needs. Because the policy also includes a death benefit, it can still be beneficial for loved ones even if you never need to use the money for care.
There are also combination annuity and long-term care policies available in the marketplace whereby you can receive regular funds for cognitive and/or physical care needs, or you could receive a regular income payout to supplement your other retirement income sources.
Are You Protected?
Dementia and memory loss can come about in a variety of ways. So if you start to notice symptoms in a spouse or other loved one, it is essential to be patient and understanding while also letting them know that there is hope. Likewise, spending quality time with loved ones is priceless.
Even if you and your spouse or partner are currently young and healthy, unexpected illnesses can and do occur. So it is essential to prepare for the cost of care ahead of time, because if you wait until you actually need long-term care, it will be too late to buy insurance that can protect your savings.
Working with a financial professional who is well-versed in long-term care planning is a great way to make sure that potential costs are covered so that your current savings can remain in place for its originally intended purpose.
• Alzheimer’s Association: alz.org
• Dementia Action Alliance: daanow.org
• Genworth 2020 Cost of Care Survey: genworth.com/aging-and-you/finances/cost-of-care.html
• National Institute on Aging: nia.nih.gov
This article appears in the November 2020 edition of OutSmart magazine.