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Nursing Home Costs

A MAJORITY OF SENIORS will spend little or no time in a nursing home. Among those age 65 and older, 44% of men and 58% of women will need nursing home care, according to a November 2014 study by Boston College’s Center for Retirement Research. But the average stay is less than 11 months for men and 15 months for women. In fact, 50% of nursing home stays for men and 39% for women last less than three months, which means Medicare—not Medicaid—likely paid the cost.

What if you stay longer? If you have few assets, Medicaid should pick up most of the tab. What if you have some savings? You could quickly deplete your nest egg, which is why many folks consider long-term-care insurance.

Ideally, you will have enough saved by retirement so you can pay nursing home costs out of pocket and forego the cost of insurance (or “self-insure,” as financial experts sometimes call it). But that’s probably an option only for those with seven-figure portfolios. What about everybody else? You might plan on applying for Medicaid to pay any nursing home costs. Problem is, to qualify, you will first have to spend down most of your assets.

That might not seem so terrible if you have little money. But if you have done a moderately good job of saving for retirement and have, say, a $400,000 or $500,000 portfolio, it is hardly an attractive prospect. What’s the alternative? You might look into long-term-care insurance, including hybrid policies that combine life and long-term-care insurance.

While both men and women need to consider how they will pay for long-term care, it’s a particularly pressing issue for women: Because they typically live longer than men, they will often find themselves looking after an ailing husband. But when they need care, they’re on their own—and a nursing home may be the only option.

Next: Long-Term-Care Insurance

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