Tweet

The U.S Census Bureau released a report analyzing demographics of those who are at least ninety years old. Most of these elders relied heavily on Social Security with much higher rates of poverty than younger generations. Living arrangements also demonstrated that those ninety and older are more likely to live at home or with family caregivers.

The report 90+ in the United States: 2006-2008 analyzed data for the 90-and-older population and compared aspects of the data set to that of younger senior citizens. “Traditionally, the cutoff age for what is considered the ‘oldest old’ has been age 85,” said Census Bureau demographer Wan He, “but increasingly people are living longer and the older population itself is getting older. Given its rapid growth, the 90-and-older population merits a closer look.” Since 1980, the ninety plus population has nearly tripled, to 1.9 million in 2010.

Social Security payments are nearly universal for this population, with 92.3 percent of those ninety and older receiving some sort of income from the Social Security Administration (SSA). Providing nearly half of their annual income on average, Social Security was also the primary source of income for many of those over ninety. Even with assistance from Social Security, those aged ninety or older often struggle financially. The annual median income is 14,760 dollars per year with men earning much more than women, 20,133 dollars annually versus 13,580 dollars annually. 14.5 percent of those ninety or older meet the official definition of poverty. These older individuals are poorer than other seniors. Seniors aged 65 and older had a poverty rate of 9.8 percent.

Most of those aged ninety or older:

• Lived alone or with a family member, who likely took on caregiving tasks given that 80.8 percent of those ninety or older have some form of disability.
• About 37 percent of those aged ninety or older lived alone and 37.1 percent lived with family members.
• 2.9 percent lived in assisted living or other residential care options, while 22.7 percent lived in some form of institutionalized setting.
• Men were more likely to live with family, while women were more likely to live in skilled nursing, senior living communities, or alone.

(Read the entire report at )

Tweet

As human beings, we just aren’t biologically wired to think about events far off in the future. Fight-or-flight works well enough to handle short-term problems, but when thinking about events that are both uncertain and decades in the future, many people find it easier to simply postpone the matter and worry about it later. Unfortunately, when it comes to dealing with long-term care needs, that sort of mindset makes the problem much worse. The sooner a person starts thinking about their needs and their strategies for meeting those needs, the better the slate of options.

Long-Term Care
Long-term care is a broad term that covers medical and non-medical support, for people where chronic illness, disability or the recovery from an acute illness, has left them unable to fully care for their own needs. This can take the form of skilled nursing facilities, nursing homes, assisted living arrangements and other hybrids and alternatives.
While most younger people think they will always be healthy, the numbers say something different. In fact, the Department of Health and Human Services estimates that at least 40% people over the age of 65 years old will need some form of live-in (nursing home) care. Unfortunately, this care does not come cheap. A survey done by MetLife discovered a private room in a nursing home can easily exceed $80,000 a year, and assisted living can cost almost half as much.

Making matters more difficult, Medicare only pays for the first 20 days of medically-necessary care and then pays partially for the next 80 days; the Social Security payments for the average American are not going to cover those live-in expenses.

A Problem That Will Probably Get Worse
Those numbers are sobering enough, but they may be optimistic, in many respects. According to The Bureau of Labour Statistics (BLS), health care costs have been outstripping GDP growth, inflation and average wages, for quite some time and it is hard to see how this is going to reverse, as more and more aging Baby Boomers strain facilities even further. At the same time, the U.S. government has serious issues with both its budget and debt, and it seems improbable that the government can afford to make more generous allowances for Medicare, Medicaid or Social Security.
On top of that, the last five years have brutalized many people’s retirement portfolios. Those who expected to use their house as a store of retirement funds have seen property values plummet, while those invested in the stock market have seen significant losses and may have been spooked out of the market, entirely.

Options for Affording Care
So what can people do to fund their long-term care needs? The first, and worst, option is to just hope for the best; hope that you don’t get sick and/or that there will be family members or other loved ones there to take care of you. Another poor option is to just plan, or hope, to pay for it out of savings and retirement funds. Given that the average person has less than $100,000 saved for retirement and a single year of nursing home care can cost $80,000 or more, it is not hard to see how this plan could effectively wipe out a retirement and leave a person wholly dependent on Social Security for day-to-day expenses.

A much better alternative is to plan directly for these expenses, and there is a familiar way to do this. Insurance is basically a means of protecting oneself from unexpected events of unknown cost, and long-term care insurance is an option that nearly everyone should investigate.

Long-Term Care Insurance
Long-term care insurance is basically what it sounds like: a policyholder pays premiums and the insurance company promises to cover specified expenses in the future. While there are limits within most policies, policyholders can generally expect to have their costs covered across a wide range of services, including nursing homes, assisted living, hospice and adult day care.

These plans truly reward forward thinking, as they are relatively cheap, when bought young. Annual premiums can be $900 or less, for those signing up before age 40, while the rates on those same policies leap to $2,000 or more per year, after age 50. Although it is true that the money cannot be recouped if the policyholder never requires long-term care, that is a basic risk with all insurance; you don’t get rebates if your house doesn’t burn down or you don’t need surgery every year.
So, for $75 a month or less, most people below age 40 can protect themselves from the risk and uncertainty of how to pay for ongoing health care, later in life. What’s more, there are a wide variety of options and plans available, so a little bit of research and comparison shopping can pay real dividends.

Another Alternative
There is at least one other alternative to consider with long-term care needs. People who are really bothered by the idea of never needing long-term care, and thus “wasting money” on unnecessary coverage, may want to consider an annuity. Annuities are basically investment contracts whereby the individual pays a predetermined amount, either in full or in installments, and receives payouts at a later date. These payouts can be fixed, variable or a mix, depending upon the type of annuity.
There are plenty of drawbacks to annuities. They often carry considerable costs and commissions, the proceeds are usually at least partially taxable, and they generally offer less of a “return” than long-term care insurance policies. On the other hand, annuity proceeds can be used however you like and there’s no “use or lose it” risk. Like so many things, it’s a question of risks, costs and trade-offs.

The Bottom Line
Anyone reading this is likely to live longer than their parents, and while medical technology is keeping us all alive longer, it cannot always guarantee that we will live independently. Accordingly, long-term care needs to be part of everyone’s long-term financial plan. While long-term care insurance is a very good option for many people, the worst option of all is to do nothing and postpone the discussion so long that affordable options begin to disappear.

(Original Story: http://financialedge.investopedia.com/financial-edge/1111/Why-You-Need-A-Plan-For-Long-Term-Care.aspx?partner=sfgate#axzz1dDjolwQC)