Long-term care insurance is becoming an increasingly popular topic among consumers, and for good reason. A recent study showed that 40% of the people who turn 65 each year will spend some time in a nursing home.1 As people live longer, these odds likely will increase.
1 "Some Observations About the Senior Citizens' Freedom to Work Act of 2000." Journal of Financial Service Professionals, January 2001.
Changing Times Bring New Concerns
Most of us know at least one person who has stayed in a nursing home or needed professional home health care. The financial consequences of long-term health care can have a significant impact on a family's savings and lifestyle. According to the Health Care Financing Administration (Fall 1996), a total of $106.5 billion was spent on long-term care, and nearly half of that was paid, out-of-pocket, by the patients and their families. Those accumulated expenses can use up a major part of your savings. For people who enter a nursing home, the financial outcome can be worse: according to the Congressional Subcommittee on Aging, 79% to 80% of nursing home residents deplete their assets within twelve months.
To understand who needs long-term care insurance, it's necessary to understand basic changes taking place in American society. According to the U.S. Census, there were 32 million people age 65 and older in 1990 but by the year 2030, this figure could double to 64.6 million. Moreover, people are living longer today than ever before. By the year 2040, there may be more people over age 85 than there are over 65 today. Not only are we getting older but, over the next 50 years, the working age population may increase only 2% to 18%, while the elderly population is expected to increase anywhere from 139% to 169%.
For years, it was tradition for adult children to take care of their parents during the "golden years." But changing times have brought an increase in dual-career families, job insecurity, family mobility, and divorce. Today, many adult children are not able to stay home and look after their own children, let alone an aging parent. In addition, corporate downsizing has eliminated thousands of mid-management jobs throughout the country. Consequently, many adult children are not in a position to financially help their parents as they had planned. Add to this the increasing uncertainty of health care benefits for senior citizens, and a giant question mark looms on the horizon.
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|Long-Term Care: What You Need To Know|