The "Excluding Social Security V 3.1" spreadsheet in this website can be used to estimate a current appropriate reserve (present value) for long-term care expenses by increasing current estimated long-term care costs with expected future increases in such costs, entering that amount as the desired amount of savings remaining at death (including possible reserve for long-term care), and solving for the accumulated savings that will leave that amount at death (with little or no withdrawals prior to the end of the input period).
This is a trial and error process.
One of my actuary friends indicated that I punted somewhat on this issue in my post of December 26, 2015 when I had my hypothetical retiree, Richard Retiree simply assume that the equity in his home would cover his future long-term care expenses. If Richard's home equity were significantly more or less than the estimated present value of his future long-term care cost and he plans on spending his home equity during his retirement, he could include the current value of his home equity as an asset in the spreadsheet and the future expected cost of long-term care as a liability as discussed in the paragraph above.
Readers may be interested in several recent articles on this subject from Dr. Wade Pfau:
Some of the key takeaways from Wade's articles include:
- Long-term care is a generally a larger need (and therefore a higher expected cost) for women than men.
- "The odds for needing long-term care are higher for individuals with greater longevity in their family history and those with a family medical history including dementia, Alzheimer’s disease, and neurological disorders."
- "Costs for long-term care vary by geographic region, type of facility and services used, and reasons for care."
- "Generally, the cost of long-term care has risen faster than overall consumer price inflation."