Heisenberg discovered the fact that you cannot measure location and velocity at the same time. This is called the uncertainty principle, and it can seem like a purely scientific thought experiment. At the same time, in a way, it applies to your everyday life when it comes to financial budgeting.
You are in a certain place financially right now, and the things that you need cost you a certain amount. However, what about the future? You don’t know exactly what your financial position will be, and you don’t know how much things are going to cost you.
Furthermore, you don’t even know exactly what you are going to need 20 or 30 years from now.
What does this have to do with elder law?
As elder law attorneys, this is a dynamic that we deal with all the time. We are advising clients who are standing in the present, but they are trying to prepare for events that may happen when years pass and they become senior citizens. This can be challenging, but it is not impossible.
Fortunately, there are studies done that compile data that can be used to project certain realities that will be relevant in the future. In this post we will look at one study that is quite relevant to people who are trying to prepare for the eventualities of aging.
Nursing Home Costs
Before we get into the study, we should explain some general things about nursing home care. Everyone knows that there are those who ultimately reside in these facilities, but there are misconceptions.
Some people are under the impression that the average person will never live long enough to require nursing home care. For this reason, they assume that only a very small percentage of senior citizens ultimately reside in nursing homes. They go forward with the idea that the odds are in their favor, so they don’t worry too much about nursing home costs.
This is an optimistic point of view to be sure, but reality tells a different tale. First, let’s address the question of longevity. The segment of the population that was between 85 and 94 was the fastest-growing age group between the years 2000 and 2010. A person who is reaching the age of 67 right now will probably live into his or her mid-eighties according to the Social Security Administration.
When you absorb these statistics, you can see that you may well live into your mid-eighties, and this is probably more likely if you have actually taken good care of yourself throughout your life. This is another misconception that people have. They harbor the notion that a healthy lifestyle will prevent the need for nursing home care. In fact, it could work the other way around.
If you were to visit the Alzheimer’s Association website, you can obtain a lot of important, detailed information about this disease. The reason why you may want to do so is because the disease touches a great many American families. According to research that you can find on the Alzheimer’s Association site, 45 percent of people who are at least 85 suffer from Alzheimer’s disease.
Clearly, many people with this disease require nursing home care, and there are other reasons why people need the care that nursing homes provide. Ultimately, nearly 25 percent of people who are 85 years of age and older are in nursing homes, and this number swells to 50 percent among people who are at least 95 years old.
Most working people will qualify for Medicare when they reach the age of 65. This health insurance program does not pay for nursing home care. When you combine this reality with the fact that you may well require nursing home care before all is said and done, you can see why nursing home costs should be on your radar.
Now we can get back to the uncertainty principle. Genworth Financial has been conducting a study that puts a finger on the pulse of the state of nursing home costs. Here in Indianapolis where we practice law, at the present time, the median annual charge for a private room in a nursing home is $97,411. That’s a lot of money, and people often require multiple years of care.
However, what if you need nursing home care in 20 or 25 years? Genworth has endeavored to provide some insight. According to their calculations, the median charge for a private room in an Indianapolis nursing home will rise by seven percent per year over the next five years.
If you apply this kind of growth to a 20 or 25 year period of time, the numbers could be off the charts.
What Do You Do?
What’s the solution? Give us a call at (317) 684-1100 or drop us a message through our contact page to get the answer.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.