The growing divide between what seniors earn and how much they pay for health care is a rational motive for younger individuals to set aside funds each month in case of emergencies. However, for the graying baby boomers near retirement, saving for a rainy day may be too late, since 30 to 40 percent of them earn less than $30,000 a year. The earned income is hardly enough to cover daily living expenses like housing and health care, much less leave some to reserve and invest. Young Seniors Should Focus on Growing Assets and Investments
In some cases, home budgets and rent can consume close to 50% or more of a person’s income. In 2016, the poverty threshold for a single individual living in California stands $11,880. According to UCLA’s Elder Index, a measure of the cost for housing, food, transportation, and health care, for a 65-year-old tenant, the base price for needs is $24,024 and growing.
Since health and long-term care expenditures far outweigh any other outlay, the burdens can rob a senior of solvency. Two studies, one titled the Long-Term Care Over an Uncertain Future and the other, America Talks: Protecting Our Families’ Financial Futures found that Americans would rather ignore the notion that continuing care one day will be necessary. Both studies confirmed that at least 70 percent will require continuing care, while less than 37 percent admit they’ll use it. The misconception sets up a minefield for crisis. Young Seniors Should Focus on Growing Assets and Investments
Together, the reports conclude that it’s in the last years of life, that one will need a hefty savings and income to pay for all the outlays that acute care will demand since Medicare does not cover it. Older adults will require continuing help with activities of daily life such as personal care assistance for bathing, dressing or eating. In some cases, a well-planned person can count on a LTC insurance policy, but only few have purchased it. The trick is to buy it early to keep it within budget. Young Seniors Should Focus on Growing Assets and Investments
From collating the 2014 U.S. Census data, the Seniorcare.com city and state guides show the earned income of senior households in the 50 states. The stats reveal overwhelming concern and incongruities showing that seniors have minimal resources to pay for future care. If the base price of living for one person is over $24,000 in California, what happens when they need help after an adverse health incident or episode? How will they pay for the extra help?
Earned Income vs. Health Care Costs in California, New York, and Texas
I was curious to know what senior citizens are up against in regards to earnings and potential health care bills. Reviewing the average and median income, and comparing it to the long-term care costs, I found no matter what state one lives, the average earnings of an individual has nowhere near enough to cover the costs of assisted living or home care.
In California, the median household income for seniors 65 and over is $43,181; New York is $37,228; and Texas is $36,915. In every state, health care costs rank high, and it makes me wonder how do the people handle it when in need?
But that’s the median earnings. Look at the average income of seniors living in these states. In California, 37% of the segment earn less than $30,000 per year; in New York, it’s 42% who make that amount; and for the Texans 65 and over, it’s 42% making less than $30k.
Continuing Care Costs
The low incomes are astonishing but comparing it to potential outlays will overwhelm. When paying for home care, California, commands top dollar. Home care, for 44 hours, runs $4,385, and residential care (assisted living) is $3,750 a month.
New York is equally expensive. You’ll pay $4,004 for the same amount of hours. And if you move to an assisted living community, expect to pay $4,100 each month.
Texas isn’t much less; it runs close to the same for home care, about $3,527, but assisted living runs a bit lower, $3,545 each month. Young Seniors Should Focus on Growing Assets and Investments
Doing the math illustrates that a significant number of people struggle to pay for continuing care, maybe that’s why 89 percent of seniors want to age in place. It’s the only option that makes sense, but if they have a mortgage or pay rent, then it doesn’t compute. In-home care will add stress to the already stretched budget.
Like I mentioned earlier, the data across the other states are similar and not much more affordable. So, if you haven’t prepared for future care, time is running out. And if you’re still young, don’t make the same mistake. Start today.
The underlying basis is, if you want to choose a quality long-term care option, you must have a plan to pay for it. Many seniors find that Social Security and other earned income is not enough.
So what can you do? First off, talk with a financial advisor, they can lay out all your possibilities to pay for future assistance.
Young Seniors Should Focus on Growing Assets and Investments