After a divorce, long-term care planning is critical. This is especially true for divorce after age 50, known as the “gray divorce”. Chronic health problems become more common as we age and are more difficult to manage without a live-in partner.
Women are especially at risk
Statistics show that women have good reason to be particularly concerned about long-term care needs compared to men.
- On average, women live nearly 6 years longer than men, making them more likely to reach an age where may require long-term care.
- Women aged 65 or older have a 75% chance of needing long-term care services in their lifetime, compared to 64% of men.
- Women also tend to need long-term care services for a longer duration (7 years on average) compared to men (2.2 years).
- Women make up over 70% of nursing home residents and 75% of those receiving assisted living services.
- Women are often caregivers themselves and well-aware of the challenges of elder care.
The high cost of long-term care
Age-related long-term care services are not covered by traditional health insurance or Medicare, which pay only for short-term, rehabilitative care.
So, what does it cost? Here are the average figures for the United States:
- $5,900 per month for Assisted Living Communities
- $6,483 per month for Home Health Aide Services (44 hours per week)
- $10,646 per month for Nursing Home Care (private room)
Click here to see the average costs in your state.
How to protect yourself
Solving this issue requires a holistic approach that considers all your financial resources as well as your overall health and social support. If you are in good health, your options may also include long-term care insurance.
Three key financial strategies
- Build up retirement savings. For those who have already accumulated for retirement, there may be an opportunity to build those assets even more, not only for supplemental retirement income, but also as a resource for long-term health care. An experienced CFP® Professional can help you project the likelihood of meeting these needs over your lifetime and set up a systematic savings plan.
- Earmark a potential inheritance. Are you the beneficiary an estate in the future? If so, these funds could be earmarked and managed specifically for long-term care needs.
- Tap into home equity. The equity value of your home can be an excellent source for funding long-term healthcare expenses, especially if you have a mortgage that will be paid off before age 75. There are several ways to strategically tap this resource later in life.
- Sell and relocate: Your housing needs will likely change as you age. Selling your home provides the opportunity to convert excess home equity to liquid savings or investments. And moving into a more practical home or senior living community could be a better fit for your budget and lifestyle.
- Refinance the house: Depending on terms and interest rates, refinancing can give homeowners access to cash and potentially lower their monthly mortgage bill.
- Reverse Mortgage: This is a more complex strategy, but potentially useful for people who expect to stay in their current home for most of their life. Reverse mortgages are often pitched as the “best of all worlds”, but consumers should tread carefully. A reverse mortgage can be an expensive way to borrow and can also limit your options if you decide to move.
What about long-term care insurance?
For people in good-to-excellent health, obtaining a long-term care insurance policy can be a viable option. Policies typically cover all levels of care whether at home or in a facility.
Benefits are paid if the insured meets the policy definition of having a cognitive impairment or require assistance in performing two of five activities of daily living which are eating, bathing, dressing, continence, transferring in and out of a bed or chair, and toileting. Policies typically have a waiting period, like a deductible, where the insured must pay out-of-pocket for a period such as 90-days before the policy benefits kick in.
According to the 2024 American Association for Long-Term Care Insurance (AALTCI), the average annual premium for a $165,000-benefit policy is $1,200 for 60-year-old male. For a 60-year-old female the average cost is $1,900 (58% higher than rates for men).
While these prices may seem affordable, the value of the policy can be eroded by inflation by the time care is needed 20 years or more down the road. To maintain purchasing power, policies can be purchased with an inflation protection feature which increases the benefit amount annually. This in turn raises the insurance expense dramatically. Using the same example above, a 5% annual benefit increase raises the cost for a 60-year-old male from $1,200 to $3,800 per year. For a 60-year-old female the cost rises from $1,900 to a whopping $6,700 per year.
Moreover, qualifying for coverage can be difficult. In fact, 30% of applicants aged 60-64 are turned away for health reasons. As such, the best time to buy long-term care insurance is before the onset of chronic health conditions such as arthritis, high blood pressure, etc.
If a divorcing couple already has long-term care insurance, the policy should be analyzed carefully as part of the divorce settlement process.
Housing and Lifestyle Strategies
Now that we have covered the risks, costs, and strategies to protect yourself for a long-term care event, here are a few ideas worth exploring to help you navigate the aging process:
- Senior living communities. There are a wide range of housing options for seniors. At one end of the spectrum is 100% independent living at home. At the other end is 100% confinement to a nursing home. Senior living communities fall somewhere in the middle. Residents typically live independently in their own apartment with social activities, meal services, and housekeeping. Living in such a community provides a measure of safety since there are neighbors and staff around in the event of a health issue or other emergency. Social connections also provide the opportunity to avoid isolation and maintain independence as long as possible.
- Home modifications. Equipping the home with accessibility and safety features can support “aging in place”. Such modifications could even include accommodations for a live-in caregiver or roommate.
- Invest in health and wellness. Living a healthy lifestyle helps postpone the need for assistance as long as possible. This not only improves quality of life. It also gives your investment and home equity dollars more time to accumulate.
- Build your network. Cultivate a strong support system of family, friends, or professionals who can assist with health care decisions and caregiving.
Government assistance
State-funded Medicaid programs provide a safety net for those who have no other options. Many counties also provide senior services such as meals, wellness visits, transportation and adult daycare.
Get professional guidance
In summary, there is no one-size-fits-all approach to planning for long-term care. Every potential solution requires a commitment of energy, time or money. A Certified Financial Planner (CFP®) or Certified Divorce Financial Analyst (CDFA®) can help you assess your options and use your resources wisely.
Investment advice, financial planning, and retirement plan services are provided by Prosperity Planning, Inc., an SEC registered investment advisor. The information contained herein, including but not limited to research, market valuations, calculations, estimates and other material obtained from these sources are believed to be reliable. However, Prosperity Planning, Inc. does not warrant its accuracy or completeness. The information contained herein has been prepared solely for informational purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or to participate in any trading strategy. If an offer of securities is made, it will be under a definitive investment management agreement prepared on behalf of Prosperity which contains material information not contained herein and which supersedes this information in its entirety. Any investment involves significant risk, including a complete loss of capital and conflicts of interest. The applicable definitive investment management agreement and Form ADV Part 2A will contain a more thorough discussion of risk and conflict, which should be carefully reviewed before making any investment decision.
