The True Cost of Long-term Care: Do the High-Net-Worth Need Insurance?

High-net-worth individuals generally can self-fund long-term care without the need for insurance. Nonetheless, the potential for large, open-ended costs makes advance consideration of this possibility essential.

The projections are sobering. Over two-thirds of individuals age 65 and older will require some type of long-term care, according to the U.S. Department of Health and Human Services. The median annual cost for a private room in a nursing home is $91,250 and 24-hour home care can exceed $170,000, according to a 2016 study by Genworth Financial, the leading provider of long-term care insurance.

With Alzheimer’s disease or dementia, a worst-case scenario may entail a decade or more of full-time care at an expense of over $1 million. An estimated 5.3 million Americans had Alzheimer’s in 2015, according to the Alzheimer’s Association – all but 200,000 of them age 65 and older – and the number is growing rapidly. Almost two-thirds are women.

Those numbers underscore the importance of factoring into any comprehensive financial plan the possibility of a catastrophic event. Even when affordability is not an issue, such a major cost could have far-reaching consequences on a portfolio and reduce the amount that can be safely withdrawn in retirement.

Insurance may still make sense for the wealthy in certain instances. Some may wish to consider it as extra protection for their bequests to heirs, or, if they have a family history of Alzheimer’s, to cover those future costs. The most important thing is to give this issue consideration in advance.

To learn more about this topic, read Caring for Aging Parents, an in-depth guide to help families identify resources for navigating this increasingly common journey.

The material shown is for informational purposes only and should not be construed as accounting, legal, or tax advice.  Altair Advisers LLC is a registered investment adviser with the Securities and Exchange Commission; registration does not imply a certain level of skill or training.  While efforts are made to ensure information contained herein is accurate, Altair Advisers cannot guarantee the accuracy of all such information presented.