Long-term care for older adults can quickly wipe out retirement funds

Nursing home care costs far more than most families expect, and public programs cover less than they assume. Understanding what Medicare and Medicaid actually pay for, and planning early, is the best way to protect your retirement savings.

The price of long-term care in a nursing home is often much more than you’d expect. Families are often taken by surprise because they expect public programs like Medicaid to pay for more than they do in reality.

A single year in a nursing home can cost more than many households save across an entire career. Given that these charges emerge only in the later stages of life, when incomes are fixed, it can be hard to deal with without a clean slate of preparation.

What Nursing Home Care Costs

Nursing home care is among the most expensive forms of healthcare because it provides medical and skilled nursing care along with standard accommodations. Compared to other senior communities, nursing homes are the most expensive because residents need constant medical support.

According to the AARP Long-Term Services and Supports State Scorecard, the average cost of a private room in a nursing home runs more than $108,000 per year or $9,000 per month. If you compare that figure to the typical income of an older household, you’ll see that it’s often more than twice what someone on a typical budget could afford.

The costs can vary by state. If you compare the costs against local incomes, nursing home care ranges from under 170% of median income for people in older households in the least expensive states to as high as 300% in the more expensive ones.

Why So Many Families Will Face This Cost

People assume that they’ll never need this kind of care, but the data points the other way. According to researchers with the federal government, around 70% of adults who reach age 65 will develop serious long-term care needs before they pass away. Around 28% of these older adults will spend at least 90 days in a nursing home.

But how long does the average person need long-term care throughout their lifespan? Women tend to need long-term care for about 3.7 years on average, while men need it for about 2.2 years, according to figures from the Administration for Community Living.

Long-Term Care: What Medicare Doesn’t Cover

An unfortunate and common misunderstanding is the belief that Medicare pays for long-term care in a nursing home. In most cases, you’ll find that Medicare doesn’t cover skilled nursing and facility care except on a short-term basis. For example, if you’re recovering from an accident and need help with everyday tasks such as bathing and dressing, Medicare will cover the cost.

But when you need care in the long term, the coverage expires, and long-term nursing care becomes very expensive. 

When Medicare coverage runs out, many families turn to qualifying for Medicaid crisis planning to help cover the long-term cost.

What This Means for Your Retirement

The cost of long-term care in a nursing home rarely matches what families expect. Care that runs more than $108,000 a year far outpaces the retirement income of most households, drawing down savings that were meant to last decades.

But you’re not without options. If you understand these limits early, you can plan around them rather than react to them, and keep more of what you worked for.