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Long Term Care Costs Are Devastating |
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A lot of attention has been paid to lifetime health care costs during the recent debate over the federal health care overhaul plan. The group with the most concerns may be those in or nearing retirement, because health care costs tend to go up with age.
Retirees have to deal with the costs of Medicare premiums, supplemental coverage's, out of pocket expenses, and potential long-term care costs. How much should a couple have set aside for retirement health care costs at age 65?
Wild card costs
Many experts have tried to quantify this amount for the average retiree. The problem with such predictions, however, is that not all retiree experiences will be alike. Health, of course, is a big factor in ultimate costs, but the ultimate wild card is whether one or both members of a couple will need long-term care, says a recent study by the Center for Retirement Research at Boston College.
"The cost of long-term care represents a substantial financial risk for all but the poorest households," the Center noted.
It predicts that about a third of individuals turning age 65 in 2010 will need at least three months of nursing care at some point, while 24 percent of those turning 65 will need more than a year's care. An unlucky 9 percent will need five or more years of care.
It notes that in 2008, the latest year for which national statistics are available, the average one-year nursing home stay cost $79,000 for private room. Employing a home health aide for four hours a day, five days a week would cost about $22,000, the Center says.
Few alternatives
The Center says the average 65-year-old couple needs about $197,000 at retirement to handle lifetime health care costs, but that there is a 5 percent probability that the cost of all care including nursing care will exceed $570,000. It notes that fewer than 15 percent of households have total financial assets in excess of that amount at retirement.
The best alternative is to explore buying long-term care insurance well before hitting age 65. Although the insurance is costly, the annual premium is lower for buyers who are younger and healthy. Costs go up dramatically for older buyers.
©OSB Financial Services, INC rights reserves.Information has been obtained form sources believed to be reliable, but its accuracy and completeness and the options based thereon, are not guaranteed. Always consult your a financial adviser and prospectus before making an investment
©2009, Kelly Ruggles Web site
Kelly C. Ruggles is a fee-based financial planner located in Spokane.
Kelly C. Ruggles, President of American Reliance Group, Inc., a registered investment advisor.
Kelly Ruggles is the author of "The Financial Playbook" for Retirement
Kelly C. Ruggles does not intend to provide personalized investment advice through this publication and does not represent the strategies or services discussed are suitable for any investor. Investors should consult with their financial advisors prior to making any investment decisions
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