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Crystal ball time... future cost of assisted living?
Old 09-12-2014, 09:40 AM   #1
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Crystal ball time... future cost of assisted living?

If you assume the cost of assisted living for two people (assume worst case memory care) is approximately $11,000 per month today. What do you think is a best guess (i.e. inflation rate of service) for the cost 20 years from now?

I'm thinking a reasonable approach to determine "excess funds" to be spent enjoying life is any $ amounts above the amount needed to safely fund that future expense.

Hope this makes sense...
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Old 09-12-2014, 10:24 AM   #2
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I would use 6% compounded annually. The other issue is for how long care would be needed.

The solution to your concern is to take $11,000 x 12 =$132,000 (one year of care) and set that aside as a minimum in a mutual fund such as Wellington Income. Leave it alone. If you need memory care you will likely need more than a year if you are a woman, men typically fail faster in a care setting as the wife will have cared for her husband until she can no longer do so. Personally I would add $10,000 a year to that fund until one of you passes away.

A classmate had a stroke and received skilled nursing care for almost 5 years before he passed away at 73 yoa shortly after their LTC policy exhausted benefits. The reason he lived so long is that he was in great shape before the stroke.
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Old 09-12-2014, 10:55 AM   #3
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My bad. I didn't summarize well. The figure of $11,000 per month is based upon what it cost for two people (it is approximately the cost I recently experienced for my parents). I also figure need to assume minimum of 7 years to a maximum of 10 years in "final" stage worse case scenario.

With a 6% inflation factor (I found my parents over the last 6 years was more like 3%) you get a pretty big number 20 years out... $423,000 per year. If that is the case, that is a pretty big nut to cover ($3 million for 7 yrs)...

3% inflation puts it at $238,000...
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Old 09-12-2014, 10:59 AM   #4
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If you assume the cost of assisted living for two people (assume worst case memory care) is approximately $11,000 per month today. What do you think is a best guess (i.e. inflation rate of service) for the cost 20 years from now?
I wish I had the answer to that question!

As Baby Boomers like me begin to grow older and more likely to need assisted living facilities, I think the cost of these facilities may increase considerably faster than the CPI due to supply and demand. Hopefully the yield on my investments will provide more increase than CPI inflation.
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Old 09-12-2014, 11:05 AM   #5
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I wish I had the answer to that question!

As Baby Boomers like me begin to grow older and more likely to need assisted living facilities, I think the cost of these facilities may increase considerably faster than the CPI due to supply and demand.
What caused the question is that lately I've been focused on the issue of not leaving "too much" money on the table when DW and I die. Clearly there is no knowing the unknowable, but I'm convinced I am preserving our assets too conservatively as we approach the 60 year mark.

Finding the balance on spending "excess" capital is a tricky one, at least for me...

Any and all thoughts/experiences are welcome.
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Old 09-12-2014, 11:28 AM   #6
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I wish I had a crystal ball... all of this stuff is the hard part. If I knew how long I would live and if I would need LTC...the planning would be so much easier. I have no kids to leave money to and I'd like as you say not leave too much money on the table when we are both gone. Right now I think we have enough to not bother with LTC ins which seems to be both somewhat expensive and limited in terms. The idea of paying for something you might never need or use is a bit different than say car or house ins where you are pay to protect yourself and your assets at least to me
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Old 09-12-2014, 11:59 AM   #7
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On the other hand, in 20 years, we may have a cure for senility & Alzheimer's and be on to the next weak link in the chain.
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Old 09-12-2014, 12:36 PM   #8
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On the other hand, in 20 years, we may have a cure for senility & Alzheimer's and be on to the next weak link in the chain.
Can't decide whether to be happy or sad at this thought! Pretty soon you'll have to start planning for 125 year life span. Ugh...
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Old 09-12-2014, 01:04 PM   #9
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Wellington Income has returned, on average, 8.5% over the last decade. Personally I would put one year's care expense in that fund and let it grow. How much the care you will need and its cost is not ascertainable. If you save more than you need at the end it will be in your estate. If you need more than you have then there will be enough to be admitted to a very good care facility that accepts Medicaid after you have exhausted your assets.

Your cost of care is the amount that is charged for one person in my community, consider where you would live if care is needed.
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Old 09-12-2014, 01:33 PM   #10
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Interesting question. Just some random thougts:

1) I wonder if we might be discounting the possibility of technical advances such as robotics for home care in the 20-30 year timeframe that a lot of posters at this forum are looking at.

2) I'm curious to see how other countries that are further along the ageing demographics such as Japan and Western Europe deal with this issue. I guess one possible way as in the attached link, Germany is "exporting" nursing home patients to lower cost areas such as Poland. Germans Export Grandma to Poland as Costs, Care Converge - Bloomberg. Along the same lines, it has been mentioned that Mexico is creating a nursing care "industry" with some english speaking doctors and nurses in areas that have a lot of US expat presence.

As mentioned @ prior post to be certain of the best possible care in the US for an extended period the sums required get to be such a big nut that it doesn't seem like a realistic possibility for most.
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Old 09-12-2014, 01:38 PM   #11
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Interesting question. Just some random thougts:

1) I wonder if we might be discounting the possibility of technical advances such as robotics for home care in the 20-30 year timeframe that a lot of posters at this forum are looking at.

2) I'm curious to see how other countries that are further along the ageing demographics such as Japan and Western Europe deal with this issue. I guess one possible way as in the attached link, Germany is "exporting" nursing home patients to lower cost areas such as Poland. Germans Export Grandma to Poland as Costs, Care Converge - Bloomberg. Along the same lines, it has been mentioned that Mexico is creating a nursing care "industry" with some english speaking doctors and nurses in areas that have a lot of US expat presence.

As mentioned @ prior post to be certain of the best possible care in the US for an extended period the sums required get to be such a big nut that it doesn't seem like a realistic possibility for most.
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Old 09-12-2014, 01:46 PM   #12
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The figure of $11,000 per month is based upon what it cost for two people (it is approximately the cost I recently experienced for my parents). I also figure need to assume minimum of 7 years to a maximum of 10 years in "final" stage worse case scenario.
Consider that you will have no other expenses besides these at the time, so if you have a retirement income of $60k/year then you'll only need to cover $72k/year extra, not $132k. Also, if you own your home, you can sell it to contribute to this.

If you invest the money in something that will at least keep up with inflation, you don't need to guess at what inflation will be. Just plan for it in today's dollars.
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Old 09-12-2014, 02:05 PM   #13
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Interesting question. Just some random thougts:

1) I wonder if we might be discounting the possibility of technical advances such as robotics for home care in the 20-30 year timeframe that a lot of posters at this forum are looking at.

2) I'm curious to see how other countries that are further along the ageing demographics such as Japan and Western Europe deal with this issue. I guess one possible way as in the attached link, Germany is "exporting" nursing home patients to lower cost areas such as Poland. Germans Export Grandma to Poland as Costs, Care Converge - Bloomberg. Along the same lines, it has been mentioned that Mexico is creating a nursing care "industry" with some english speaking doctors and nurses in areas that have a lot of US expat presence.

As mentioned @ prior post to be certain of the best possible care in the US for an extended period the sums required get to be such a big nut that it doesn't seem like a realistic possibility for most.
Certainly interesting to contemplate; however, I do not how you would begin to quantify this in dollars and cents.

I must admit when I think about this I fall pray to the old adage, "trees don't grow to the moon" and anything like $200,000 per person per year EVEN 20 years out seems hard to imagine: ESPECIALLY with 30 yr. UST's yielding 3.35% today.
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Old 09-12-2014, 02:24 PM   #14
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Having been the payer of same, including "Dementia care" for the last 5 years ($9,000 mo, in 2014). The rates have risen between 6% and 8 % each year , and the compounding really starts to make a big impact. Far larger than the "C.P.I." and it certainly was not from labor cost. This facility has not given line staff any raises during that period. This is in Los Angeles County where the real rate of un-employment is about 15%

I can only speculate on raises for the one R.N, who is the "Medical Services Director", who along with the general manager, has been there during the entire time. Middle level skilled staff turnover at this place seems to be about 50%.
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Old 09-12-2014, 02:31 PM   #15
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Having been the payer of same, including "Dementia care" for the last 5 years ($9,000 mo, in 2014). The rates have risen between 6% and 8 % each year , and the compounding really starts to make a big impact. Far larger than the "C.P.I." and it certainly was not from labor cost. This facility has not given line staff any raises during that period. This is in Los Angeles County where the real rate of un-employment is about 15%

I can only speculate on raises for the one R.N, who is the "Medical Services Director", who along with the general manager, has been there during the entire time. Middle level skilled staff turnover at this place seems to be about 50%.
Interesting. My experience is in CT (certainly not a low cost state). I found that each year the AL provider asked for around 7%; and, each year I negotiated them down to around a 3% increase. No doubt I was able to do this for two reasons: initially I had two parents and secondly their stay (for the remaining parent) ended up being about 7 years.

Unfortunately I do not suspect I will have the negotiating skills when/if I am the one needing care in 20 odd years...

I should add I was equally appalled at how the line staff was paid for all the hard work they did. And make no mistake, the frontline staff is what makes or breaks the place from the consumer's perspective.
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Old 09-12-2014, 05:04 PM   #16
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It is of course unknowable but here is a guy with a considerably more optimistic outlook. Perhaps wildly optimistic:

Quote:
By 2050, a completely new type of human will evolve as a result of radical new technology, behaviour, and natural selection.


This shift is so significant, he claims, it is comparable to the change from monkeys to apes, and apes to humans.


'Your 80 or 100 is going to be so radically different than your grandparents,' Mr Last says, who believe we will spend much of our time living in virtual reality.
'Different' species of human will have evolved by 2050, scientist claims | Mail Online
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Old 09-13-2014, 09:28 AM   #17
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As for want of a crystal ball. I read somewhere that the average stay, outside of need for memory care, is 7 months. So I've set aside $265 per day x 7 months x 2 people. $265 is the average daily rate for assisted living in my area. As someone mentioned, the "regular" budget will go down by a decent amount.

I've also started looking into CCRCs in the area. My plan is to enter one when I am 75 (DH will be 79). That will also help to alleviate some of the "longevity anxiety" I experience when I consider ER.
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Crystal ball time... future cost of assisted living?
Old 09-14-2014, 11:54 AM   #18
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Crystal ball time... future cost of assisted living?

Keep in mind the fact that the daily rate is the base. If you need help to eat, are bedridden and need more intense assistance a premium is charged. To set aside the base for the average stay is more than most do in our society but don't fool yourself thinking that will be adequate.

Assisted living is the lowest level of care. Residents are basically ambulatory, not in need of bathing assistance, and not a danger to others.

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Old 09-14-2014, 12:32 PM   #19
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Random thought: isn't this something you might insure yourself for? As the odds are quite small you need it for a long time, but the potential impact can be huge if you do.

In any case, asking for a quote should give you an expected cost.
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Old 09-14-2014, 05:11 PM   #20
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FWIW, my mother was in what I considered a nice, pleasant, well-staffed memory care facility, and we are in what I think of as a fairly low cost area in the Midwest.
Her monthly bill started at around $5,300 in 2010, and got up to around $5,700 in 2012 by the time she died.
So the increases don't necessarily have to be huge; it depends on the facility.

That said, I believe the long term average for health care increases is about 7%, so Brat's response in post #2 seems like the best approach to me.
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