The Sources + Costs of Care
Most Care is Provided by Family Members
1 in 3 retirees are expected to spend a year or more in a nursing home
But many need more help. The cost of such help varies widely, depending on where you live and the level of services provided. But on average here are the costs:
- In-home care
- $20 an hour for homemaker services. Somewhat more for health care aides, evenings, and weekends
- That’s $5,000 a year for 5 hours a week, $10,000 for 10 hours a week.
- Day care centers
- $70 a day
- That’s $17,500 a year for 5 days a week.
- Residential facilities
- $40,000 a year for assisted living
- $75,000 a year for a nursing home
Source: U.S. Department of Health and Human Services, at http://longtermcare.gov/
Covering the Cost
"Other Spending" Typically Falls Sharply
Should you need care, you’ll probably spend less on items such as travel, transportation, and entertainment, and can shifted that spending to help cover the cost of care.
If you need assisted living or nursing home care, the fee covers much or all of your living expenses. Social Security, pensions, and other continuing income will also cover at least part of the cost.
To cover additional costs, you have 3 options
- Pay “out of pocket,” using your savings or cash from your house.
- Buy long-term care insurance that covers these costs.
- Rely on government services, including Medicaid, the state-run program that pays the cost of nursing home care for those with limited means.
Should You Pay Out-Of-Pocket?
Should You Use Reserves or Your House?
It depends on how much you need. Note that long-term care in a nursing home could require hundreds of thousands of dollars, depending on the additional cost and number of years needed.
Could you use your house?
- If you’re single, you could sell it should you need to move into a nursing home, as you might no longer need your house.
- It’s more complicated for couples. If one spouse needs moderate care, the other can often provide it. But should that spouse need nursing home care, the other still needs a home to live in, and much of their income for current expenses.
Should You Buy Insurance?
Less than 15% Have Long-Term Care Insurance
You can buy private long-term care insurance to help cover the cost, including the cost of in-home and community services as well care in a residential facility.
- Premiums are about $200 a month per person for a policy bought at age 65 that pays up to $60,000 a year.*
- But you could be charged a higher or lower amount, based on your medical history, state of residence, and other factors.
- And your premiums could rise in the future, if the insurance company’s costs are more than expected.
* National Clearinghouse for Long-Term Care Information, “Long-Term Care Insurance Costs and Receiving Benefits,” Washington, DC.
Should You Rely on the Government?
Most States Have Programs that Help Low-Income Seniors
These programs provide in-home personal and health care assistance, food, transportation, and other services. For information on services available in your state, go to
Medicaid covers long-term care in a nursing home — and most people use Medicaid to cover the cost.
- If you’ll have “limited means” when you need to enter a nursing home, usually toward the end of life, Medicaid will cover the cost.
- The definition of “limited means” varies from state to state.
- If married, many states also allow a spouse to keep the house + about $100,000, should you or your spouse need care.
- If you only rely on Medicaid, your nursing home options could be significantly limited.
- Once in a home, however, most will accept Medicaid payments should you run out of funds.
Make a Plan
To Address the Risk of Needing Long-Term Care
Until you do, it’s hard to make a retirement plan.
Long-term care in a nursing home is the only significant expense you’ll likely face down the road. So to plan for retirement, you need to decide
- Will you buy insurance? If so, you need more income to pay the monthly cost.
- Will you rely on savings and home equity? If so, how much do you need in reserve?
- Will you rely on Medicaid? If so, how might you protect your spouse (if married)?
Only then can you figure out a retirement income plan – how to use your savings and house to get the monthly income you need, not just now but for the rest of your life.
So make a plan, and do it now. If you put it off, you’ll likely put it off again. And if you don’t make a plan you
- Might not afford the care you want.
- Deplete the savings you or your spouse will need down the road.
- Hold more than you need in reserve and live on less than you otherwise could.