How Much Does Long-Term Care Actually Cost (And How Do I Pay For It?)

It’s the topic nobody wants to think about, let alone talk about: what do I do once I can no longer live independently?

Long-term care is not a cheap expense, but where you live can have a big effect on how much it’ll cost. A new study by Seniorly ranked the states in order of assisted living affordability, and it interestingly was almost a reverse of my previous article about the best and worst states to retire.

What is long-term care?

Long-term care is a health expense not covered by your regular insurance. For those with chronic illness or who reach an age when they can no longer care for themselves, options such as nursing homes, assisted living and in-home care can be necessary but pricey.

For many, the cost of these services can be barriers, leading to family members acting as caregivers rather than paying a professional.

What does it cost?

In the study, 40,000 assisted living communities were analyzed based on the monthly cost of living.

The winner for most expensive assisted living costs was New Jersey, costing an average of $5,893 per month, followed by New Hampshire and Alaska. The least expensive was Georgia, averaging $3,045, with North Dakota and Missouri only being a few dollars behind.

Of course, these costs will vary based on the level of “luxury” of the community so the costs can be lower for a lesser option, but you probably don’t want to spend your final years in the assisted living equivalent of your college apartment.

And, because assisted living is not a medical service, this expense will not be covered by health insurance.

Does a lower cost of care mean I should move there?

Back in April, I published an article about the best and worst states to retire, based on a scoring system that looked at crime rates, poverty numbers, culture and overall health and wellbeing. The best state was New Hampshire. It has the lowest crime rates in the country, no state income tax and third best state health and wellbeing.

Despite being the best state to retire in, it’s the second most expensive state for assisted living.

North Dakota, which was one of the cheapest states for assisted living, was the second best state to retire in. It was ranked the second-best state for weather and location, the third best for culture and the tenth for health and wellbeing.

The reason I give these examples is to show that there are far more factors to consider when choosing a place to retire than just the cost. You may want to choose somewhere that’s near family members, or that has a climate you enjoy, allows you to take part in your favorite hobbies or has a culture that speaks to you. The cost of living is important, but it’s not the most important element. Saving money while being miserable is no way to live.

What do I do with this information?

Prepare.

Nobody wants to think about the day they may need help doing simple things like getting dressed or remembering medication. But getting older is a privilege that many of us, hopefully, will get to experience and it’s one that can be expensive.

In the Seniorly study, based on an average savings rate of 7.5% and each state’s median income, it showed that it could take up to 13.6 years to save for just one year of assisted living in New Mexico but only 7.2 years to do so in Utah.

That’s a lot of time spent putting money away just in order to survive for one year. Is savings alone your best option?

Who should consider long-term care insurance?

Because health insurance does not cover most costs of aging, you’ll want to make other plans as early as possible. One option is long-term care insurance. This is a good thing to consider for two main reasons: 1. You won’t have to rely only on your savings and 2. It can help maintain your dignity.

Let’s look at each reason.

First, it will protect your assets. You won’t drain your savings paying for care. If you have a spouse who is healthy and children you’d like to leave money to, you may want to consider this so that they are set up financially. But if you’re single and don’t need to worry about spending down your savings, then paying out of pocket may be better than spending the money on an insurance policy.

Secondly, we all want to live with dignity. You want to live your remaining years in a place of your choosing where you are comfortable and happy, not a place where you’re sent because it’s all you can afford.

Long-term care is expensive, so having the foresight to take out a policy while you’re young—meaning in your 40s or 50s—so you can pay it off over, say, 20 years will make it easier on your financial plan.

In general, long-term care insurance is a good option for most people. The only exceptions are those with too little money to afford the premiums and those so independently wealthy that paying for care out of pocket is not an issue. So deciding if a policy is best for you is something to consider carefully and, ideally, with a fiduciary financial advisor.

The Lesson:

It’s no secret that getting old is expensive, so being prepared to pay for it is something you should start planning for early.

Think very carefully about where you want to retire and how much it will cost you, save diligently for the future and consider options like long-term care insurance and Health Savings Accounts. If you haven’t already, start working with a financial advisor to make sure you’re on the right track to retiring with dignity.