So, What’s Your Long-Term Care Plan?

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[dropcap]W[/dropcap]hile the general rate of inflation is officially tame, the same can’t be said for the cost of long-term care. According to the latest survey of long-term care costs from MetLife’s Mature Market Institute, the daily cost of a private room at a nursing care facility rose 4.4 percent in 2011 to $239. The average monthly tab at an assisted living home rose an even steeper 5.6 percent. If you’re planning on sticking it out at home, don’t expect that to be any bargain either. The current hourly rate for a basic homemaker is $19 and if you want/need a health-aide that costs an average $21 per hour. Even at just 5 hours a day that works out to $100 for a 5-day week–if you’re lucky enough to have kids nearby to help you out on the weekends.

And that’s just the national averages. For this year. If you really want to make yourself queasy, play around with Genworth Financial’s online long-term care cost calculator that takes today average costs in hundreds of metro areas (or states) and then lets you project out the cost for when you think you might be needing some long-term care help.

I took a spin through, assuming someone age 50 today living in either New York City or San Francisco might need long-term care 30 years out from now, at age 80. It ain’t pretty:

Annual Cost of Care: 2011 and 2041; Source: Genworth Financial 2011 Cost of Care Survey

Yikes, right? And don’t expect the government to be of much assistance. Medicare provides very limited LTC coverage. And last month the Obama administration killed plans for the CLASS act, a new LTC funding program it had championed as part of health reform. Turns out the government couldn’t figure out how to make the plan financially sound.

Now to state the obvious, MetLife and Genworth love pulling together these annual cost reports given that they are both actively in the business of selling long-term care insurance. Talk about compelling sales material. I’ll be the last one to tell you that LTC insurance is a must. For starters, an academic study from 2005 estimated that less than 20 percent of folks age 65 will run up LTC bills in excess of $100,000 over their lifetime, with just 5 percent needing more than $250,000 to pay for care. But what does strike me as ridiculously important is to seriously think through the “what if” scenarios, and make sure your family—not just you, but your grown kids as well-have considered the potential financial impact if you do run into needing some care.

For starters, take a spin through the Genworth Financial calculator and see what a semi-private room in a nursing home might run you a few years out. I’d then multiply by two, given that the average late-stage stay in a nursing home is just shy of two years. I’d position that as worst-case scenario. Most of us will be lucky enough to avoid needing nursing home care. Most, but not all.

Can You Afford to Stay Home?

But home care? You really need to think that one through. Half of today’s 65-year olds will still be alive into their mid 80s. And there’s a 60 percent chance that one spouse among a 65-year old couple today will still be alive at age 90. Just saying.

If your current retirement savings is on track to provide plenty of income to cover the bills, great. You’ll be able to “self-insure” in financial advisor parlance. But if the numbers give you pause, well, why not give LTC insurance a look-see? You don’t have to pony up for a big-ticket policy that would cover 100 percent of your potential costs, but why not buy you and your family some breathing room by having a policy in place that would lessen what you-and your loved ones-might need to handle out of pocket.

Another Genworth survey of 800 families dealing with long-term care found that families taking care of someone ended up shelling out $8,000 of their own money in 2010. That was above and beyond the $14,000 spent by the person who needed care. (Those costs exclude the expense of any care at a nursing home or assisted-living facility.)

And it’s not just your care you’ve got to worry about. It’s your parents as well, right? If you’re stressed whether your parents might end up leaning on your for support, maybe you and the sibs should be thinking about ponying up the $1,000 to $2,000 annual premium cost for a solid LTC policy. Granted, this works best if your parents are still in their 60s—you can still qualify for LTC insurance at later ages, but the cost can get prohibitive.

Hopefully you-and your parents-never need to tap an LTC policy. But LTC insurance is just like fire insurance and auto insurance. It’s not about “losing” if you don’t use it, it’s the peace of mind that comes with knowing if the need arises, you’re covered.

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Carla Fried

Carla Fried is a freelance journalist who has covered just about every nook and cranny of personal finance for media including Money Magazine, The New York Times, and CBS MoneyWatch.com. Prior to launching her own reporting and writing business in 2002 she was a senior writer at Money and the managing editor of Quicken.com.

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