Will nursing care take all your money?
Columnist looks at the costs of long-term care, how far one couple’s assets would go, and the risk of not being insured for such care.
Q: I’d like your opinion for sheltering our money. I’m 67 and my wife is 62. I retired at 55; she retired at 50. We both have pensions that are adequate.
I’m collecting Social Security. Our IRAs total $875,000 and we have yet to withdraw any money from them.
In both local and high-interest checking, we have another $300,000 in savings. We paid cash for our house and our cars are leased. I think we’re in good shape.
Recently my wife had to put her parents in a nursing home.
We now know that if one of us were to be placed in a nursing home, all of our savings could be exhausted.
How can we shelter our savings so that if one of us has to enter a nursing home, the other will still have a substantial amount of money to live on?
A: There is no direct way to shelter your savings from the possible, but not inevitable, cost of long-term care (LTC).
One obvious solution is to purchase a long-term-care insurance policy. You’d have to pay an annual premium.
But before you do that, let’s consider a different perspective.
First, you have enough financial assets to support LTC for a long time.
You also appear to have enough income from Social Security and pensions to pay your basic expenses as a couple without leaning on your investments.
So, if one of you went into nursing care, the other would have the money to carry on without drawing heavily on investments for ongoing personal expenses.
Genworth, one of the major providers of LTC insurance, does an annual survey of long-term-care costs.
For 2014, its survey indicates these median costs: $41,184 a year to have a home health aide; $42,270 a year for one person in a private, one-bedroom unit in an assisted-living facility; $50,735 a year for a semiprivate room in a nursing home; and $65,700 a year for a private room in a nursing home.
For most people, these costs represent the fast track to being broke.
Your financial assets would last through nearly 18 years of private-room nursing care, even if your $1.175 million provided no return.
Alternatively, a return of 5.6 percent would pay the $65,700 bill.
And if full private nursing-home care isn’t required, the money will last even longer even if it earns no return.
Could you still run out of money? Of course you could. You could be really unfortunate.
But the operative word is “could.” The odds are against running out of money because most nursing-home stays are relatively brief.
A 2010 study published in the Journal of the American Geriatrics Society found that the median length of stay was five months.
Sixty-five percent of nursing-care residents died within one year of nursing-home admission.
Copyright 2015, Universal Press Syndicate