Risks of Ignoring Potential Extended-Care Costs

Fifty percent of Americans worry that they won't have enough money to pay for long-term care in retirement — yet only 18 percent have seriously considered buying long-term-care (LTC) insurance.

Although entering a nursing home may seem like a remote possibility today, there's up to a 50/50 chance that either you or your spouse will need long-term care after age 65. Due to the rising cost of such care, LTC insurance has become one of the fastest-growing types of coverage on the market. And because the cost of LTC insurance is largely based on your age and health, buying a policy while you're still young and fit could help you save on premiums.

Who Won't be Paying Your LTC Expenses

Medicare

Some people mistakenly assume that Medicare will pay their long-term-care expenses. But in reality, Medicare pays for only the first 20 days of skilled nursing care following a qualifying three-day hospital stay. Between days 21 and 100, you pay $105 a day and Medicare pays the balance. After that, coverage stops completely. Assuming a room rate of $150 a day, a relatively short six-month stay could end up costing over $20,000.

People hoping to rely on Medicaid for relief aren't much better off. Before they can qualify to receive benefits, Medicaid requires them to "spend down" their personal assets to the legally mandated level.

LTC Insurance Options

Long-term-care insurance usually covers three different levels of care: custodial care, for those who need help with basic daily functions, such as eating, bathing, and dressing; intermediate care, for occasional nursing or rehabilitative services either at home or in a nursing facility; and skilled care, or daily care provided by a medical professional.

As with so many other things in life, preparation may be the best defense against long-term-care costs. If you're worried you may not be able to afford extended care in retirement, now might be a good time to explore your options for coverage.