Will Assisted Living & Care Cost Me More During Retirement?

Many people get the opportunity to analyze whether it is more affordable to get home care or to live in a nursing facility. Whether it’s your aging parents, or if you’re getting up there in years, you may be comparing the expense of round-the-clock home care versus the costs of a nursing home. As you can imagine, both scenarios are pricey propositions. If you need help preparing your finances for retirement, consider working with a financial advisor.

How Much Home Care vs. Nursing Home Costs

Assuming you’re looking for round-the-clock care, home care is generally always going to be more expensive. According to the most recent Genworth Cost of Care Survey, in 2021, the monthly median cost of having a home health aide 24/7 was $19,656 or $235,872 a year.

To have had a private room in a nursing facility the same year would have cost $108,405. On the other hand, if that home health aide only came 20 hours a week (so, perhaps one would come over four hours a day, five days a week), the median cost a year would be $28,080. Ten hours a week would cost half that. So compared to living in a nursing home, home care costs can potentially be affordable if somebody is aging in place and if it’s feasible for hours to be limited.

What You’re Paying for

With home care, you’re always compensating somebody for their expertise and time. That may mean paying for some relatively simple skills, like having a home aide pick up groceries or doing some laundry for a senior. But it also may require a home aide to help with medical treatments or even bathing. The more time you pay, it starts to add up.

With a nursing home, that obviously entails paying for rent and experienced staff to meet medical needs as well as food preparation and general supervision. Still, the business model of a nursing home, with a small army of professionals taking care of a lot of guests, will generally always be less cost-prohibitive than hiring numerous home health aides or medical professionals to take care of somebody in their home, around the clock.

Much of what drives up the cost of both a nursing home or receiving health care at home is whether you’re receiving custodial care or skilled care. Custodial care sometimes referred to as basic care, is any non-medical care that can be given by a non-medical professional.

That would include activities such as helping an elderly person get dressed or cooking for them and doing their laundry. Being watched over at a skilled care nursing facility means you’ll often be receiving the type of care that can only be provided by a medical professional, whether a doctor, nurse or physical therapist.

Considerations Before You Make a Decision

There is a lot to think about before you make a decision on what sort of care an elderly person needs and this list won’t cover it all, but some factors you need to think about include:

• Where the money is coming from: Will you or your parent be dipping into personal funds? Are there retirement funds that can pay for a nursing home or home care? Medicare pays for many healthcare services for the elderly, from hospital visits to hospice, but it doesn’t cover assisted living or long-term care. If you or a parent have little to no net worth, however, applying for Medicaid might be an option. That federal government-run health insurance program does cover some types of long-term care.

• General health: Obviously, your or your parent’s health will dictate whether you can have a home aide visit a couple hours a day or every other day or if you will need a lot of care. If you can get away with a few hours a week, this would be the time to start thinking about long-term care planning and preparing for a day when you may need round-the-clock assistance.

• References: It’s easy to get overwhelmed by issues surrounding health and money, but the quality of the help you receive matters greatly. You’ll want to do as much research as you can on the type of care that is out there. For instance, there is a big difference between a long-term care facility and a skilled nursing facility, the latter offers more medical services.

The Bottom Line

Spending money on home health care or nursing home isn’t a topic anyone really enjoys discussing. But it is an important one and while it’s understandable that a lot of people would want to put off the topic, getting ahead of the problem now, should make things easier when retirement comes around. Proper planning can help protect you against the unexpected and make sure you make the right investment.

Tips for Retirement Planning

• When you’re planning for your retirement it’s important to make sure your finances cover the healthcare and living situation you desire. Getting the help of a financial advisor can make all the difference in the finances you have at the time of retirement. If you don’t have a financial advisor then finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• You can also use SmartAsset’s free retirement calculator to help you determine how much money you’ll need to save for retirement.

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