Hopefully not. But with nursing home expenses rising at a brisk clip, it is important not to ignore this issue when planning for retirement. The median cost of a retirement home is about $230 a day or $83,00 a year. That is enough to put a big dent in many a wallet. A stay of even two or three years could wipe out a couple’s entire retirement saving. Unfortunately, like any unpleasant subject, nursing home planning is not a favorite discussion. And not only is it unpleasant but the costs can be so daunting that there is a tendency to just throw one’s hands up in the air and just risk that it doesn’t happen to you. That is completely understandable and often even justifiable.
What I mean by that is that long term care (or nursing homes or retirement homes — lots of names for similar things!) costs a lot of money and not everyone can afford it. Period. In fact, I would contend that long term care should only be a major concern for those that will be in dire straights if that unfortunate event occurs. And that is not as large a proportion of the population as you may think. Naturally, anyone with very large estates (at least over a million dollars in liquid assets) don’t really need long term care insurance. A stay in a retirement home for even five or six years for one spouse will not leave the other destitute, although no one is arguing that it would be pleasant. And for those people with very few assets, the cost of insurance may very well be not worth the amount that you are trying to protect. That leaves the middle class, or probably more accurately the upper middle class. They have a real danger of leaving one spouse (or their heirs) nothing to live on after a prolonged stay.
It is this group of people that need some form of protection to prevent this financial hurricane from wiping out their savings. There are ways to self insure with an annuity, for example, that is large enough to cover an extended stay in a nursing home. But as I went over in this article, that is usually not practical to say the least. That really just leaves long term care insurance. It can be expensive, but keep in mind that you can purchase it in the form of what is, in essence, partial insurance. For example, while nursing homes may be about $230 a day (for now) you can buy insurance that only covers you (and your spouse) for $100 a day or $150 or whatever amount you feel is best. That way you can do a full cost/benefit analysis to best fit your circumstances. And while an extended stay may be difficult, with that partial insurance, total financial devastation might be avoided. I’ll have more on this topic soon, but as always, be sure to do some research before you leap. If you are using a broker ask him to set up a few options for you to consider. Nursing homes are not fun topics but with a little planning a really bad situation can be, if not avoided, then at least survivable.