Long-term care isn’t a subject most people like to talk about, but its a critical subject for everyone, and especially women because they are more likely than men to enter a nursing home at some point in their lives. Despite this, a recent U.S. Bancorp Piper Jaffray retirement study found that the vast majority of women (67 percent) don’t have funds earmarked for long-term care expenses. In 20 years, a year in a nursing home could cost up to $495,000. Considering an average stay is three years, it could cost those who aren’t prepared more than a million dollars.

Who needs to hear this news? Women who are approaching retirement age and their children need to discuss the family finances, including the opportunities and threats, such as long-term care.

Here are some additional important points to consider:
• Women have unique financial planning needs.
• Nearly 90 percent of women will need to manage their own finances sometime in their adult lives, either by their choice, divorce or death of a spouse.
• Women live five to seven years longer than men, and more than half (52 percent) of women will spend time in a nursing home or need in-home care.
• About 75 percent of nursing home residents are women and women will spend more than twice what men will spend on care.
• Although long-term care planning is critical, its often not discussed. Nearly half (48 percent) of respondents the U.S. Bancorp Piper Jaffray study said they have not talked to their parents about their parents will or estate plan. And, nearly one in three (27 percent) women in our study said they haven’t discussed retirement plans with their spouse or significant other.

The key to a comfortable retirement is planning early planning. Meeting with a financial professional to consider all aspects of retirement, like long-term care insurance, can help women ensure a comfortable retirement. Long-term care planning gives women control over what type of care services they will receive and how it will be paid for with assets or insurance. Plus, planning can save women and their heirs from paying more than a million dollars for care.

Long-term care costs often neglected

An often forgotten part of retirement planning is long-term care. Nearly three out of four women (71.6 percent) in a recent U.S. Bancorp Piper Jaffray study said they want stay at home, regardless of health issues they may encounter later in life. But, a whopping 67 percent of women respondents don’t have funds earmarked for long-term care expenses.

Long-term care costs rising, long-term care insurance can save more than $100,000

Today, typical nursing home costs run $150 per day or about $55,000 a year. Thirty-one percent of women are likely to need care for an average of two to three years, leading to total expenses of $110,000 to $165,0005.

Those costs are expected to triple within the next 20 years to an estimated $330,000 to $495,000 a year. That’s over a million dollars for the average nursing home stay!

Round-the-clock, in-home care can be twice as much.

Long-term care insurance can save women thousands of dollars. If 55 year-old woman began purchasing long-term care insurance today, shed pay about $1,570 a year. If she needed long-term care services in 20 years, she would have paid only $31,400 for her insurance. But her insurance would pay approximately $143,278 per year for her long-term care costs.*

Women should plan early with their financial professional to ensure their portfolio can cover the remainder of long-term costs.

*This is an example of a typical policy and assumes a five percent inflation rate. Keep in mind that long-term care insurance programs vary.

Women unprepared, misconception of help with costs

Most women don’t plan for long-term care because they underestimate the cost and overestimate the assistance they’ll receive from the government and other sources. The truth is, more than a third (38 percent) of all nursing home costs are paid for by individuals and their families.

Fewer than one in five women U.S. Bancorp Piper Jaffray survey respondents (18 percent) said they plan to purchase long-term care insurance. Most believe that long term costs will be covered by other sources: 33.4 percent said health insurance, 30.3 percent said Medicare/Medicaid, 15 percent said Social Security and 22.8 percent said retirement funds. Respondents could choose more than one answer.

According to research by the Health Care Financing Administration (1996), there isn’t a lot of outside help available.

Medicare pays for only about 9 percent of nursing homes costs, and these payments are for only 100 days of skilled care (like an LPN, not just a helper for daily needs) following hospitalization. Medicare pays for 100 percent of skilled care costs for the first 20 days and 80 percent of costs for the next 80 days.

Medicare supplement insurance, usually called Medigap, covers the 20 percent that Medicare does not pay. But Medigap policies mirror Medicare; they don’t cover assistance with activities of daily living or supervising patients with cognitive impairment.

More than one-third (38 percent) of all nursing home costs are paid for by individuals and their families. The rest is picked up by Medicaid, but only after the individuals “spend down” their personal savings to qualify for federal poverty guidelines.

Baby boomers may be responsible for parents long-term care costs:

Many baby boomers are now experiencing the harsh reality of insufficient retirement planning, and are having to support their parents long-term care financial needs. The key is to plan and plan early. Meeting with your financial professional when you’re nearing retirement (and suggesting your mother has done so too) will save tens of thousands of dollars and prevent long-term care financial responsibility from falling on family members.

About the survey:

The survey firm MarketFacts conducted the national phone survey for U.S. Bancorp Piper Jaffray on May 7-9, 1999. Respondents included 402 people between the ages of 35 and 54. The margin of error is 4.9 percentage points.

“Retirement Myths vs. Reality” Information Available:

Check into the U.S. Bancorp Piper Jaffray Web site (piperjaffray.com) for common myths that could affect your retirement and the realities you need to know to make the most of this important phase in life. A retirement calculator also is available; click on Solutions for Individual Investors.

(Editor’s Note: Kris Taylor is with the Tacoma office of U.S. Bancorp Piper Jaffray, a full-service investment firm founded in 1895. She can be reached at (800) 933-5521.).