How to Budget for Long-Term Care Expenses

Long-term care is a subject many people avoid until they’re confronted with the reality of aging or an unexpected health crisis. While we all wish for a healthy and prosperous retirement, the increasing longevity of Americans means a greater likelihood of needing long-term care at some point. The problem? Long-term care can be expensive—devastatingly so—and its costs are rising every year. With proper planning, however, you can reduce the financial strain on you and your loved ones.

The Rising Cost of Long-Term Care

As healthcare technology improves and people are living longer, the demand for long-term care services—such as nursing home care, home health aides, and assisted living—continues to rise. According to Genworth’s annual Cost of Care Survey, the median cost of a semi-private room in a nursing home in Mississippi was around $85,416 in 2021. Projected forward with an annual increase of 4%, this cost could escalate to over $100,000 per year sooner rather than later. Such staggering amounts can quickly deplete your savings and become a financial burden on your family.

When to Start Preparing

The best time to start preparing for long-term care expenses is now. While it may seem premature to think about long-term care in your 40s or 50s, that’s actually the ideal time to start. The younger you are when you start saving or investing, the more time your money has to grow, thanks to the miracle of compound interest. Plus, insurance options like long-term care insurance are usually cheaper the younger and healthier you are.

Steps to Budget for Future Expenses

1. Assess Your Risk

The first step in budgeting for long-term care is to evaluate your likelihood of needing it. Factors to consider include family medical history, current health conditions, and lifestyle. The better you understand your personal risk, the better you can plan.

2. Research Your Options

Different types of long-term care come with varying costs. Understand what services you might need and research the average costs in your area. Keep in mind that costs fluctuate based on location, so you may want to investigate costs in various areas if you’re open to relocating in your later years.

3. Understand Government Assistance

Medicaid provides some long-term care assistance but has strict income and asset limitations. Medicare only covers specific types of care for a limited period. Understand what federal and state programs offer and what their limitations are to avoid surprises later on.

4. Save and Invest

Establish a dedicated savings fund for long-term care. Consider aggressive investment options if you’re starting young and taper to more conservative options as you age.

5. Consider Insurance

Long-term care insurance is an option, though it can be expensive. The earlier you buy a policy, the less expensive the premiums will be. Hybrid insurance products, which combine life insurance with long-term care benefits, are also available.

6. Legal Framework

Consult an estate planning or elder law attorney to help you set up legal structures that can provide for your long-term care without impoverishing your spouse or family. Trusts and other legal entities can be crucial tools in preserving assets while still qualifying for Medicaid or other assistance.

7. Communicate with Family

Open lines of communication with your family members about your plans and wishes. This will make it easier when the time comes for them to step in and help manage your affairs.

Long-term care is a serious issue that demands immediate attention, particularly because of the rising costs associated with it. Starting your planning process early will not only give you peace of mind but also ensure that you are financially prepared for the eventualities of aging.

If you’re unsure how to navigate the complexities of long-term care expenses, estate planning, or government assistance programs, we’re here to help. At Lancaster Law Firm, our team of experts can guide you through every step of your planning journey. Contact us today to schedule a consultation and secure your future.