It is impossible to pinpoint the exact number YOU will need for care. But let’s pretend your long-term care need will fall within the range of averages.
On average, men need care 2.2 years and women 3.7 years.
The 2021 cost of care study by Genworth found that private room nursing homes cost $108,405/year. Assisted living facilities cost $54,000/year. These are national averages, and the cost of care varies drastically based on where you live.
So let’s use this ballpark figure of $118,800 – $238,491 for men, and $199,800 – $401,098 for women (2.2x the averages for men and 3.7x the averages for women).
The major flaw in using this math is that most people have some sort of guaranteed income flowing into their bank accounts.
- Social Security Income
- Pensions
- Required Minimum Distributions
Of course, not all of that income could be repurposed, especially if you are married. However, perhaps 25%, 50% or 75% of that income could be repurposed for caregivers.
Let’s say you are bringing in $100k/year between Social Security, Pension, and Required Minimum Distributions. Let’s say you are married, and all of a sudden need long term care. For simplicity’s sake, your spouse needs $50k for the household expenses. The other $50k could be repositioned to pay for long-term care. After all, if you need care, you probably are not traveling any longer, or golfing 5 days/week. This unused cash flow can now be dedicated to hiring professional help and protecting your spouse from mental and physical exhaustion.
If we assume the high-end range for men of $238,491, but we assume that $110,000 could come from cash flow (2.2 years x $50k of income), then only $128,491 of your assets need to be earmarked to self fund long term care.
Hopefully, that’s a helpful framework and reassurance that trying to come up with the perfect number is virtually impossible. After all, you may never need care. Or, perhaps you will need care for 5+ years because of Alzheimer’s.
My key point in this article is to address this challenge early (before you turn 60), and communicate your plan to your loved ones.
