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.
Statistics show that women have good reason to be particularly concerned about long-term care needs compared to men.
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:
Click here to see the average costs in your state.
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.
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.
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:
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.
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.