Question. I’d like your opinion for sheltering our money. I’m 67 and my wife is 62. Our pensions are adequate, and I’m collecting Social Security. Our IRAs are substantial as are our savings; we’re in fairly good shape. We believe, however, that one of us going to a nursing home could exhaust our savings. How can we ensure the other will still have money to live on?
Answer. There is no direct way to shelter your savings from the possible, but not inevitable, cost of long-term care (LTC). Purchasing an LTC insurance policy would involve an annual premium, which could increase. Such a policy would pay for the bulk of possible LTC costs whether you remain at home, become a resident of an assisted-living facility, or live in a nursing home.
But before you do that, let’s consider a different perspective. First, you probably have enough financial assets to support LTC for awhile. Your Social Security and pensions should cover your basic expenses.
Genworth is one of the major providers of long-term care insurance. Their 2014 survey of long-term care indicates these median costs per year:
- $41,184 to have a home health aide
- $42,270 for one person in a private, one-bedroom unit in an assistedliving facility
- $50,735 for a semi-private room in a nursing home
- $65,700 for a private room in a nursing home.
For most people, these costs represent a fast track to poverty. However, your odds are against running out of money because most nursing home stays are relatively brief. How brief? A 2010 study published in the Journal of the American Geriatrics Society found that only 27.3 percent of those dying in the study period lived in a nursing home prior to their death. The median length of stay (half stayed longer, half stayed shorter) was five months. Sixty-five percent of nursing care residents died within one year of admission. The average length of stay was 14 months, due to a small number of people who had very long stays.
Viewed another way, 72.7 percent of those dying won’t need nursing home care, and 65 percent of the 27.3 percent of those who do will die within a year of admission. This suggests that about 90 percent of the population will either have no need for a nursing home stay or will stay less than a year.