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I Am Concerned About The Cost of Care For Mom

A very real concern for most of the elderly is whether or not they will run out of money trying to meet their care needs.  This unknown is very difficult to plan for and causes quite a bit of anxiety for the majority of Americans. 

Gone are the large extended families where it is assumed that the elderly will be cared for in a multi-generational home.  While homes have gotten larger over time, most families have two working adults and no one actually at home.  We are in a different time.  The average lifespan is also far longer. This means there are many elderly living with limited mobility, dementia, and chronic disease than a generation ago.  Many need some support and care costs are significant.

So how do you plan for care costs with an unknown future? 

You need to begin by taking inventory of assets, e.g., home, stocks, savings, CDs, IRAs, pension, social security or whatever there is. 

Next consider the age of your parent.  It may be difficult, but estimate their lifespan based on their health.  Speaking to their physician (with your parent’s permission) may be your first step.  Some diseases make one’s life span more predictable than others.   For an elderly adult with no health conditions, estimating remaining life is much more difficult.

Let’s try an example of how to look at a hypothetical parent.  

Your mother is 80 years old and in good health.  She has high blood pressure, but it is under control.  Mentally she is quite strong.  You have no concerns other than the fact that she is getting older.  Your mother lives in her own, paid-for home.  She has $150,000 in assets, plus the home she lives in.  Her home is worth $250,000.  Her social security is $2,000 per month and she has no pension.

Now let’s look at what care costs.  According to Genworth Financial, in 2015 a nursing home cost averaged $7,505 per month in Wisconsin.  The average length of stay in a nursing home is 388 days, based on a 1999 nursing home survey.  So if your mother needs nursing home care and stays 13 months, in today’s dollars it would cost $97,565 using the average cost in Wisconsin.

Now if your mother is in among the 7% that stay for five years her cost would be $450,300 in today’s dollars. She will earn $120,000 in Social Security over five years before taxes, and she has $400,000 in assets.  In this most extreme scenario she would have an estate of $70,000 upon her death.  (I did not adjust for inflation)

In this scenario your mother has saved well and has retained enough money long-term care should she need it.  Most parents want to leave money to their children, but the reality is that most of what is saved may be used instead to pay for long-term care.  Wonderful are those parents who have saved and planned for their potential care needs. You should be grateful if your parent had planned this way.  And it is also true that no one can perfectly prepare for the future. All we can do is follow basic principles and do our best to make our life’s hard work payoff.

Now, if you do the exercise I demonstrated and your parent comes up short, please understand that most states have Medicaid as a backup for individuals who deplete all of their assets.  It can make it more difficult to find a facility that will accept your parent, so depleting all their assets before they need care is not a great idea. 

Do your best to help to maintain your parent’s independent lifestyle that keeps them in their home.  Safe home adaptations, help around the home, support with shopping or cleaning are all important ways to accomplish this.  Stay as close as you can to your parent as they age.  Your support can be quite helpful for preventing potential problems and helping them receive proper care.

I cannot imagine a care setting that would be less expensive than one's own home.