When it comes to creating a holistic financial plan, most people know they’ll need to save for retirement and create an estate plan — but there’s another critical element that must also be factored in: elder care. While many people consider elder care to be something they’ll need to help aging parents with, it’s equally as important to also have a plan in place for your own elder care.
It’s a hugely expensive cost that’s easy to underestimate. Just one year of elder care can range from $18,000 for adult day care to more than $90,000 for a private room in a nursing home, according to the most recent figures from Genworth. Additionally, in-home services can run for over $45,000 per year.
However, with proper planning you can handle these costs. Here are six steps to create a strong financial plan for elder care:
Prepare early and as part of your overall plan. It’s never too soon to start building an elder care plan. It should be part of your overall financial planning strategy – and something you discuss with your advisor early on. While the figures listed above are estimates of today’s costs, the expenses you’ll face will likely be much higher. Keep in mind that medical expenses and the cost of long-term care insurance have been increasing far faster than the rate of inflation, so you’ll need to factor this increase into your plan as well.
Purchase long-term care insurance. This is a good way to hedge against the loss of elder care, which can cover the cost of in-home assistance or a stay at a nursing home. The younger and healthier you are when you buy the insurance, the lower your premiums will be. Look for a company with a strong rating and a plan that includes an inflation rider.
Consider where you want to live and the cost of living in that area. One way to significantly reduce almost all of your retirement expenses is to move to a part of the country with a lower cost of living. While you may not know in your 50s where you plan to retire, it’s a good time to start thinking about whether you’ll need to make a big move.
Think long-term when it comes to your living situation. Whether you move or not, you’ll want to be sure that the home in which you plan on retiring can support you as you get older. Nearly nine in 10 older Americans want to age in place and remain in their home for as long as they can, according to the AARP. That means either looking for a new home or renovating your current one to include features conducive to aging in place, such as having a master bedroom and bath on the first floor.
Revisit your elder care plan and update it periodically. While having a plan in place increases the odds of having a secure and successful retirement, planning for elder care is an ongoing and fluid process. Revisit your plan every five years or when you have a significant life event — like a health issue or a move — to make sure you’re still on track to meet your goals, and update beneficiaries as needed. As you go through retirement, your plans and wishes for your final days may also change, so you’ll want to take stock of your plan from time to time and make updates accordingly.
Discuss your plans with your family and keep an open dialogue. Talking about your plan with your family now, including all adult children, can help make it easier for them to carry out your wishes later and to minimize any potential misunderstandings.
Having a proper elder care plan in place will not only give you financial security — it will also provide you and your loved ones with peace of mind knowing that you’ve made these important decisions for yourself and that you’ve had the foresight to plan ahead.