The Cost of Aging

Most people in the US simply aren’t ready to grow old. I know one person who has told me that his retirement plan is a gun, but is that really what most of us want?

In fairness, the suicide rate is increasing in every age group except those age 75 and older. Maybe that’s what we do want.

In the US, consumers don’t really start thinking about old age until after they turn 40. Unfortunately, that’s the age in which, if they have kids, they are saving for college and paying rather high housing costs. That makes putting anything aside for retirement a difficult proposition for all but the very rich or very lucky.

The problem is that the financial challenges of retirement are worse than most people think. Let’s break it down:

• Living expenses after one is unable to work.  That’s food and housing, and Social Security doesn’t pay enough to most people to cover these bills.
• Home health care, if you have to have someone come to the home to provide service.  That’s over $3,800 per month.
• Assisted living facilities:  Over $3,600 per month.
• Nursing home facilities:  The national average for a semi-private room is $6,844 per month, but it is as much as $13,000 per month in places like New Jersey. [Genworth]

On average, people require 2.4 years of assisted living or nursing home care. A rough estimate puts that cost at $126,000 if you don’t live in a high-priced area. Even better, Medicare currently picks up only a small fraction of this expense.

These costs are per person.  If you are part of a couple, you need to double the amount.

One way to cover these long-term care expenses in the US is through insurance — either a stand-alone Long Term Care (LTC) policy, or more cost effectively, an LTC rider on a life insurance policy. The other choices are to move to another country, move in with the kids, or deplete all of your assets and go on Medicaid. However, with the Medicaid option, you can forget about everything you ever dreamt of doing in your old age.

Other countries handle elder care more sensibly.  For example, Germany pushed through a reform package in 2014 improving government funding for home health services.  Foreign nationals living in UK can receive elder care through the National Health Service at no charge.

Why is the US so far behind?

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Sources

• Sabrina Tavernise, “U. S. Suicide Rate Surges to 30-Year High,” The New York Times, 22 April 2016. https://www.nytimes.com/2016/04/22/health/us-suicide-rate-surges-to-a-30-year-high.html?_r=0
• Genworth Financial, “2016 Cost of Care Survey.” https://www.genworth.com/about-us/industry-expertise/cost-of-care.html
• “Germany adopts nursing care reforms for elderly,” Deutsche Welle, 11 July 2014. http://www.dw.com/en/germany-adopts-nursing-care-reforms-for-elderly/a-18047908
• “United Kingdom (UK) – Elderly Care,” ExpatFocus.  http://www.expatfocus.com/expatriate-uk-elderly-care