The Top Three Things to Consider About Long Term Care

As the last of the Baby Boom generation head toward retirement, more Americans have questions about long-term care. As Boomers age, demand for long-term care is likely to skyrocket in the next two decades. Affluent Americans with longer life expectancies have lots of questions about long-term care coverage.

What is Long-Term Care?

Long-term care isn’t medical care, and accordingly it isn’t covered by Medicare or healthcare insurance. Rather, long-term care relates to assistance with what are called activities of daily living, such as bathing, dressing, and eating.

Most people are likely to need such care in their lifetimes. A recent research brief from the Department of Health and Human Services estimates that 56% of Americans turning 65 are likely to develop a condition requiring long-term care. That means for Boomers there’s a slightly greater than 50/50 chance they will require some sort of assisted care.

What Percentage of People Use Long-Term Care?

Other studies indicate that a small percentage of people over age 65 will have a catastrophic long-term-care need. For example, research from the Center for Retirement Research at Boston College examined data on long-term care and noted that about 25% of people age 65 and older will have a care need that it classifies as “severe,” meaning that an individual needs care for three years or more and/or requires a high level of assistance with multiple activities of daily living.

How Likely Is It That You’ll Need Long-Term Care?

Women are more likely to need paid long-term care than men, and the duration of that care also tends to be longer. According to the Department of Health and Human Services research, 51% of women aged 65 and over will need paid long-term care. Meanwhile, 39% of men who are 65-plus will need such care. The way insurance works (greater risk pool pays more) explains why long-term-care insurance is typically more expensive for women than men.

Married people are less likely to need paid long-term care than unmarried ones. In the HHS data, 51% of unmarried people over age 65 require paid long-term care in their lifetimes, whereas it’s 43% for married people. This is anecdotally this is what I’ve seen during my 30+ year career in personal finance. In a married household, the wife will typically provide care for the husband for as long as she is able. The most likely person needing care is a widow and the Center for Retirement Research study reached a similar conclusion, with unmarried women the most likely to have a care need classified as moderate or severe.

The more affluent you are the longer your life expectancy and the more likely it is you will require long term care. People who are in better health at age 65 were almost as likely to need paid long-term care as individuals who rated their health as fair to poor at age 65. However, the Center for Retirement Research data suggests that people who self-reported excellent or good health at age 65 were less likely to need long-term care than those in poor health.

Should You Buy Long-Term Care Insurance or Self-Insure?

The decision about whether to buy and when to buy long-term care insurance is unique to each individual or couple. The most important factor in my opinion is to make an informed decision by design – sit down with a financial professional (preferably one not compensated from the sale of a long-term care product) and go through an assessment of how assisted care would be paid for if needed.

Remember, dementia is a key catalyst for needing long-term care. People who are in good physical health but experiencing cognitive decline are more likely to have a sustained need for long-term care. If you have a family history of dementia but are otherwise in good health, it makes you more of a candidate for long-term-care insurance.

If you have questions about long-term care insurance or need a second-opinion on your retirement plan be sure to give us a call.