Pink piggy bank with coins Managing debt for seniors

Self-Insuring for Long-Term Care


The typical 65-year-old can expect to live another two decades and has a 52% of needing some type of long-term care services and support at some point in their life.  According to the U.S. Department of Health and Human Services, the average cost for long-term care is $138,000. Medicare covers hardly any of that cost. Medicaid does, but only for the impoverished.

Insurance is a financial solution for handling long-term care expenses . . . yet only about 10 million Americans have long-term care insurance. The problem is there are relatively small number of insurers that write long-term care policies and most policies come with large premiums and reduced benefits. The result is long-term care insurance policies are too expensive for many modest and middle-income households.  If you are among the millions of boomers who find the cost of long-term care insurance too steep, there are viable alternative strategies of creating your own do-it-yourself insurance plan.


Where do I Start?

You can build a healthy margin of financial safety by focusing on savings and spending, especially by thinking through your living arrangements in your elder years.  But if you’re in your 50s or 60s, don’t worry too much if you’re not flush with savings yet. You still might have another two to three decades to increase your savings; long-term care expenses usually don’t kick in until around age 80.


Hold on to Home Equity

The home is the single largest expenditure for most households. “At home” is the most popular answer to where we want to be as we age.  With that goal in mind, it pays to get rid of your mortgage if you can. Among the 65-plus population, 65 percent own their home free and clear.  That said, aging at home isn’t necessarily the best idea when fashioning a do-it-yourself long-term care plan.  Remember, these expenses typically begin in your 80s, a time of life when social isolation is a growing concern, especially if mobility is limited.


Look for Housing with Community and Cost-Sharing Built In

Look at co-housing, cooperative housing, home-sharing, shared residences and other communal living arrangements that reduce the overall cost of living and offer a built-in community. For example, home sharing involves renting out a room or part of the home to housemates, a way to bring companionship and additional income into the home.

Co-housing communities are another intriguing alternative. The community is planned by a group of people who choose to live together. It typically has large common spaces, such as a dining room, kitchen and garden and each household owns its own small place for independence and privacy. The financial advantage of co-housing lies in sharing some tasks and costs, such as grocery shopping and cooking meals. Everyone saves on his or her utility and maintenance costs.


Living with Less, Happily

There are other ways to reduce living expenses and add to cash flow. People in their 60s and 70s do engage more with experiences, like travel, taking art lessons, volunteering in the community, mentoring younger workers and spending time with friends and family. In other words, embracing a frugal or thrifty lifestyle doesn’t signal a lower standard of living — far from it.

According to a recent national survey, among the boomers who’d retired in the previous five years, many reported that their households were living on less than the 70 to 80 percent of pre-retirement income. Four out of 10 were living on 60 percent or less of their pre-retirement earnings. Do you think this is a disaster? Hardly. Despite reduced incomes, these retirees said they were satisfied with how they were doing and agreed they don’t need to spend as much as they did before.


Add a Thin Layer of Long-Term Care Insurance

If you have embraced this basic do-it-yourself plan that involves working a bit longer, spending a bit less, saving a bit more and placing yourself into a community of mutual support. Revisit the idea of purchasing long-term care insurance. Does it make sense to add a thin layer of coverage on top of your do-it-yourself plan?

The elements that go into a do-it-yourself long-term care financing plan include everything that all of us need to think about regardless of long-term care as we enter the second half of life.


Real People. Remarkable Care. South Coast Post Acute.

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