David Bakke is a contributor for Money Crashers and writes about money management tips related to insurance, healthcare, investing, long term care costs, and retirement. Chris Orestis, CEO of Life Care Funding contributed to this article.
The cost of long term care nowadays is staggering. The average annual cost of a nursing home is $63,145, a home health aide is $40,040, and homemaker services are $38,896. Partner all that with the fact that many of the government programs we rely on to subsidize these costs are facing financial strain, and now more than ever every American has to start thinking about saving up. According to Fidelity, the average 65-year old couple is going to spend $240,000 on healthcare during retirement, and that’s aside from long term care. Put yourself in the best possible position to afford these expenses by budgeting and saving now.
1. Refinance Your Home
Loan Mortgage rates are still hovering around their all-time lows, but they’re starting to creep back up. Do some Internet research and reach out to friends or family who can recommend mortgage refinance specialists. Get at least three quotes, compare rates, terms, and potential penalties to make sure you’re getting the best deal. Then earmark your monthly savings in a separate account designated for your long term care costs.
2. Cut Food Costs
Switching to a healthier diet based more on fresh fruits and produce can not only save you money but can decrease your chances of needing significant long term care. Instead of a local big box retailer or supermarket, get your produce at a local farm or farmers market, which offers higher quality and better prices. Then, get out those scissors and start clipping coupons. Although it may seem passé, it can lead to a significant reduction of your food bill.
3. Hold Off on That New Car
Think it’s about time for some new wheels? Suppose you’re looking at buying a car with a $300 monthly payment in long term care costs. If your current car is paid off and you sit tight for an additional two years, you’ve just saved an extra $7,200 for your long term care. Invest that money effectively, and assuming a 7% annual return, in 20 years you’d have almost $23,000 tucked away.
4. Get an Energy Audit on Your Home
There are plenty of ways to reduce energy costs in your home. Rather than doing all the research yourself, though, why not let your energy provider do it for you? If your provider offers in-home energy audits – and many do a representative can come to your home, complete a thorough inspection, and provide you with a report detailing all the ways you can save. I did one several years back and ended up reducing my energy bills by roughly 30%.
5. Start Paying Down Credit Card Debt
No matter your level of credit card debt, start paying it down now. If you have trouble disciplining yourself, try sticking to one simple rule: if you can’t afford to pay it off by the end of the month, then you just can’t afford it. Leave the card in your wallet, and enjoy the security of knowing your sunset years are financially secure.
6. Use a Life Insurance Policy to Pay for Senior Care
The owner of a life insurance policy of any type (term, whole, universal, group) can convert the death benefit into a living benefit that will cover the costs of Senior Care of any form they choose (Homecare, Assisted Living, Nursing Home, Memory Care, Hospice). Seniors often decide to abandon a life insurance policy in their final years because they cannot afford to continue the premium payments or they surrender it to qualify for Medicaid. Policy owners should not lapse or surrender their life insurance, because the same policy can instead be converted into a Life Care Benefit.By trading in the policy’s death benefit for a discounted sum that is placed in an irrevocable, FDIC-insured account, they will receive money for a policy they may have abandoned that is protected and use to make monthly payments directly to the care provider on behalf of the account owner. Every policy owner has the legal right to elect to take this conversion option, and numerous states have introduced laws requiring that all policy owners are informed of this option before they would lapse or surrender a policy.
Final Thoughts Consider long term care insurance, as well. All policies differ on the costs of premiums and what they will or will not cover for out-of-pocket expenses associated with a nursing home stay, in-home health aides, adult day care, and other services. Even with this safety net, however, it can’t hurt to start setting money aside now for your long term care costs.