Weighing the Costs: Aging in Place vs. a Long-Term Care Facility

Seniors looking at documents
November 10th, 2015

“If you’re caring for a loved one or think you one day might be, getting good financial advice early on is clearly the smart thing to do to help your loved one retire the way they’d like to,” says Paul Adams, Senior Director of Product Management for Lifeline. “It’s more complicated than you think because it’s multi-factorial.”

When comparing the financial impact of aging in place versus aging in a long-term care setting, you need to pit potential revenue streams — insurance policies, pensions, work income, social security benefits, and home equity — against possible expenses, including the costs of modifications made to a home, healthcare and prescription drug expenses, in-home care, relocating to a different home, and, if necessary, moving to a long-term care facility.

How Much Does It Cost to Age at Home?

According to a Merrill Lynch retirement study conducted in partnership with Age Wave and released in 2015, more than 7 in 10 homeowners over age 65 have fully paid off their mortgages, and on average, have more than $200,000 in home equity — advantages that make aging in place, or aging in a new place of choice, more attainable.

“If Mom lives in a two-story home with a basement or lives where winters are brutal and she’s at a higher risk of falling, those considerations come into play too,” Adams says. “Think beyond whether or not Mom will need handlebars in the bathroom — you need to consider the possibility that she will need a different house.”

However, if your parent does decide to stay in their house, anticipate remodeling costs such as moving laundry machines from the basement to the first floor, upgrading bathrooms to improve safety and accessibility, changing knobs to levers, widening doorways, and installing exterior ramps.

You may also need to factor the cost of in-home care in the equation is should it be needed. According to Longtermcare.gov that averages $21 per hour.

But beware when it comes to in-home care costs if you are considering it in place of a full-time, assisted care facility. “To keep somebody at home with a full-time aide could cost $100,000 to $175,000 a year,” says Ralph Robbins, a CFP (certified financial planner) who specializes in elder care financial planning. “That’s a tremendous amount of money in addition to other living expenses.”

If you are worried about a parent being alone, technology solutions can also help. Using a personal emergency response system can provide you and your loved one peace of mind that access to help is always available at the push of a button. While these wearable safety devices are often used in case of a fall, they can provide assistance for any emergency. We can provide access to such 24/7 help starting at $29 per month.

And What About Long-Term Care?

The costs of nursing care facilities vary widely by region, but a Longtermcare.gov analysis provides estimates of roughly $7,000 monthly for a private room in a nursing home or $6,000 for a semi-private room; and about $3,000 monthly for an assisted living community. AARP offers a long-term care calculator — users can enter geographic location and type of care required for an individualized estimate.

Insurance coverage for long-term care facilities provided by Medicare, Medigap Insurance and private health insurance is very limited, and long-term care insurance policies, while comprehensive in coverage, can be expensive, ranging from $2,794 annually for a couple (both age 60) all the way up to $5,637, according to the American Association for Long-Term Care Insurance.

While Medicaid is the primary source of financial support for long-term care in nursing homes, eligibility requirements and coverage vary by state, and asset limits are strict.

When choosing whether it would be best for your loved ones to stay at home, move to a long-term care facility or look for something in between, you’ll need to consider these costs, as well as their wants and medical needs.

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