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Forecasting the Cost of Long-Term Care

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For many clients, the exposure to long-term care, or LTC, costs remains the wildcard in retirement planning, so estimating those costs is an important element in planning retirement income.

Northwestern recently has used the results of a survey to launch a new Long Term Care Cost Calculator to help advisors and clients better understand their LTC costs.

The company’s Long Term Care Group conducted research that included nearly 7,000 home health-care providers, assisted living facilities and nursing homes. (The full survey report is available online.)

“It is clear that most people simply can’t afford to pay for long-term care by drawing on their retirement nest eggs,” says Terence Holahan, Northwestern Mutual. “Planning for long term care is about protecting both your assets and your lifestyle when you are unable to care for yourself; this new calculator helps educate consumers about the potential cost of a long term care event and how it can vary by age, location and length of time the care is needed.”

These statistics support Holahan’s points:

? About 60 percent of individuals over age 65 will require at least some type of long term care services during their lifetime;

? People who reach age 65 will likely have a 40 percent chance of entering a nursing home. About 10 percent of the people who enter a nursing home will stay there five years or more;

? Nearly seven in ten (68%) Americans have a family member or close friend who has been in a nursing home or received long term care in the past three years.

“The bigger picture speaks for itself: protecting yourself and your family against a long term care event is an individual responsibility,” says Holahan, who led the long term care research study at Northwestern Mutual. “In the same way you have to take the lead to save for your retirement nest egg, and not simply count on social security, you must also prepare for a long term care event and immunize yourself against the financial and emotional impact that such an event can potentially have on a family.”

The Long Term Care Cost Calculator includes a series of adjustable ‘sliders’ that allow individuals to view various long term care scenarios in real-time, setting the stage for a more in-depth discussion and consideration of an individual’s long term care risks. Holahan says that advisors can use the calculators several ways with clients.

“One would be to send the client to the website in advance and have the client work on the site themselves,” he says. The other way is to for the advisor to guide the client around the calculator in-person or over the phone. Either method will help clients see clearly how inflation affects the cost of care over time.”