When planning for extended care, many consumers and their advisors make the mistake of starting from the end, by assuming and projecting the highest possible cost of care in a private-pay, private skilled nursing home room.
According to the most recent data from the Genworth Cost of Care survey report, which was published in December, the national average for a year in a private nursing home room is $116,800. Multiply that by several years of care, and those are scary numbers indeed.
But no one wants to plan to go to a nursing home. It's the last place anyone wants to receive care.
Proactive, advanced planning for extended care is preparation for staying out of a nursing home, by making enough private-pay dollars available — through insurance or insurance combined with a client's own income and assets — to pay for home care, or for assisted living or residential memory care, when home care is not possible or no longer practical.
Advisors shouldn't focus the extended care planning conversation on a recitation of scary statistics and the highest possible cost of care in a nursing home. Instead, they should begin with a question: "If possible, for as long as possible, would you want to receive care in your own home?"
Most clients will answer, "Yes!" Those who don't want home care may not have a spouse or children close by to be informal care managers and will recognize that residential care should be a planning priority, but this doesn't necessarily mean care in a nursing home.
Focus on what clients want to plan for and what will impact their family and finances first: home care.
Even without a purposeful extended care plan, couples and other family members will default to doing everything possible to keep a loved one at home, often to the detriment of the informal caregiver. Therefore, a proactive plan for care must address this desire and the many costs — both financial and personal — that must be covered.
According to the Genworth Cost of Care survey, the national average for a professional home care aide is $33 per hour. Forty hours a week of home care therefore may cost just over $5,700 a month.
Consider asking your clients this first: "If you need care, where will you get an extra $5,700 a month to pay for part-time home care?"
This question is profoundly important for couples where the greatest financial pressure is when one spouse needs care while they are both still alive. Home care costs will be extra over and above ongoing lifestyle expenses for both and the need to preserve the future financial security of a surviving spouse.
Of course, 24/7 home care is the most expensive care, exceeding $250,000, even more than a private room in a nursing home; a few very wealthy clients may want to plan for this level of care, but that's an exception.
Even clients with several million dollars under management would struggle to afford an extra $5,000 to $6,000 a month of long-term care expenses without seriously compromising the lifestyle and financial security of a spouse or partner. Extra hours or days of home care quickly increase the cost. Twelve hours a day, seven days a week would cost $12,000 a month in 2024.
