Preparing for the High Cost of a Nursing Home Stay

photo of a nursing home bed
Share on facebook
Share on twitter
Share on pinterest

Not all estate planning is about wealth building. In fact, these days most Americans are less concerned about what happens if they die, but rather, they are more worried about what will happen if they live too long. According to the Social Security Administration’s (SSA) life expectancy tables, the average American male who is currently 65 can expect to live 84.3 years of age. A woman aged 65 can expect to live to 86.6.

The SSA reports that 25% of those living past 65 will also live to be over 90, and about 10% of them will live past 95. With longer life and better medical care, people may be living longer, but longer life also means higher medical costs.

Think Your Savings are Safe?

A married couple that has saved $1 million for retirement has done pretty well. By all measures of success, such a couple should feel reasonably proud of their savings and confident that it will last through 20 years of retirement (65 to 85), assuming they have a modest annual budget, they own their home, and healthcare costs can be handled through Medicare.

Average Cost of American Nursing Home Care

A 2015 Cost of Care Survey by Genworth suggests that the national U.S. average cost of long-term skilled nursing home care is about $80,000 per year.  For Alabama, it is around $69,000, and for the Birmingham area, it runs $73,825. According to, studies show that the average length of a nursing home stay is about 835 days, costing a total of $200,000. Of course, some people with chronic or severe conditions may require lifelong nursing home care at the end of life. Imagine a five-year nursing home stay: It could easily cost $400,000.

Paying for Care

Fortunately, there is Medicare, right?  Well, not exactly. Medicare only pays for up to the first 100 days of long-term care. Technically, Medicare is only designed to pay for short-term rehabilitation. So, if you need rehab after an injury, Medicare will pay for it, so long as you are making progress and your physicians believe you will recover and be able to return home. If, however, you require long-term care, Medicare will stop, and you will have to pay out of pocket for the care. That is unless you have planned ahead.

Long-Term Care Insurance

Many seniors over the age of 60 are smart to invest in a long-term care insurance policy, but these policies are not cheap. If you have saved a million dollars, you should have to start putting your budget toward high premiums, not to mention the fact that these policies are often quite limited and only cover a year or two of care.

Medicaid as the Primary Payer of Nursing Home Care

For the majority of Americans in nursing homes, Medicaid will pay the bill. For those with a lot of assets, it can be a challenge to understand that there are options for becoming eligible for Medicaid in order to preserve hard-earned wealth. There are often creative estate planning solutions that can shift assets to a spouse living outside of the nursing home in order to avoid having to use your entire retirement income on the nursing home bill. By setting up a qualifying trust or simply changing the ownership of certain assets, many seniors are able to preserve their savings, while ensuring that they are well-positioned to use Medicaid if they ever require nursing home care.

Birmingham Estate Planning Attorneys

If you are approaching retirement or are already in retirement, you should consider the likelihood that you may need to stretch your retirement savings for 30 or more years. Will your savings last that long if you or your spouse require nursing home care? The attorneys of 5 Points Law Group are dedicated to helping you preserve wealth and protect your savings. Call (205) 352-4455 to schedule a private consultation to review your unique retirement and estate plans today.

Related posts

Estate Planning

Coronavirus and Estate Planning

During the COVID-19 pandemic, it may feel like there are few aspects of your life that you can control, beyond hand washing and social distancing.

photo of elderly man and his caregiver

When a Caregiver Gets Too Close

If you live in Alabama and you have an aging parent or other relative, you likely are already aware of the many ways people attempt

Leave a Reply

Your email address will not be published. Required fields are marked *

Scroll Up