America’s population is rapidly aging. “Americans are having fewer children and the baby boom of the 1950s and 1960s has yet to be repeated. Fewer babies, coupled with longer life expectancy equals a country that ages faster.” – Jonathan Vespa, a demographer in the U.S Census Bureau’s Population Division.
In the face of an aging population, there are many things that we should be thankful for. This is especially true when it comes to the quality of life and care provided in these modern times eclipses that of our not so distant past. In fact, just 90 years ago back in 1930, the average life expectancy in the United States was just 58 for men and 62 for women. Aging in America is no longer just the privilege of the elite or those born with longevity in their DNA but is now a statistical given.
While aging with dignity is now seen as a given, the reality is that quality eldercare is priced at a premium. So it is important for both the elderly and their family and friends to engage in honest and open discussions about how they would like to address future care needs. There are many programs offered both by government and local non-profit organizations which as we explored in a previous article can help alleviate some of these costs.
At My Financial Coach, we feel it is important to provide comprehensive financial planning that addresses not only the concerns of today but paves a path forward to the uncertainties the future might hold. With the help of our Subject Matter Experts(SMEs), we are able to connect you with specialists familiar with long-term care planning and the impact it can have on a family’s emotional and financial wellbeing.
One such SME, Wealth Legacy Group®, Inc’s Founder and Chief Visionary Officer, R.J. Kelly shares with us his own experience with long-term care for his mother. His story not only highlights how long-term care planning has changed even in the last few decades but also how it can impact people from all walks of life.
The following article, which originally appeared on Wealth Legacy Group’s website titled “Why Do You Need Long-Term Care Insurance… I Wish I Had Known About This For My Own Mom”, is a testament to the thought process that our expert partners bring to helping My Financial Coach best serve the unique financial needs of our clients.
I adored my mom. She was blind in one eye–was the soprano soloist in our church and community choir–a terrific mom and cheerleader–and died of a horrible disease I had never heard of. It was the same disease that killed Dudley Moore, the British actor. Mom got progressively more unstable physically until I convinced her to see a neurologist and get it checked out. After many back-and-forth discussions she finally relented and went in. Her diagnosis? “Progressive Supranuclear Palsy.” It carried a seven-year life expectancy . . . and mom had already used up some of that runway.
We had no insurance to help pick up the long-term care expenses my Mom’s disease began to create. I lived in another state – my sister was unable to help – so the responsibility fell squarely on my shoulders. But . . . what could I do? Mom declined to leave her community to come live with my wife and I . . . but she could no longer live on the family property.
How would I pay for the care she needed – either for in-home care or at a skilled-care facility?
Fortunately, we were able to cobble things together financially. We also found a surprisingly affordable facility that was bright, clean and where they truly cared for my mom. Still, it was thousands of dollars out-of-pocket, and the financial cost could have skyrocketed if my mother’s care had extended for many more years.
Here I was–a trained financial professional with many years of practice–and yet, I had never faced this with a client before . . . and was unprepared for this event in my own family. True, this was over 19 years ago and today there is much greater knowledge in our profession about how to address this situation. That said, so many of the clients we work with–very sophisticated clients at many different levels–are completely or largely unprepared for this situation. Or, they are planning to self-insure the costs, not realizing they are looking at potentially $10,000/month in costs–or sometimes more. At that rate, an estate can be consumed very quickly.
From this experience with my mom, I came to find out that our family’s story is not uncommon . . . especially as life expectancies continue to be extended. There is a relatively simple solution available today, and it comes in several different “packages.” Having a plan and peace of mind in spite of a long-term care event is possible . . . “Imagine That™”!
According to the U.S. Department of Health and Human Services, approximately 70% of those turning 65 can expect to need some form of long-term care during their lives! Will you be one of the 70% requiring care? We don’t know for sure, but the odds are high that you and I will need long-term care at some point in our lives. (Which is why I have coverage to pick up these costs if this occurs to either me or my wife . . . or both!)
I wondered that myself when my mom got sick. I was surprised to find the answer was, “No.” Health coverage only pays when the person is convalescing and getting better, not when they are in custodial care. Health insurance stops paying immediately as soon as doctors determine the patient is no longer getting better. Bam!
Will that come to the rescue? No!
You can get help from Medicaid but will have to nearly exhaust all your savings before you become eligible. Not a good strategy!
The alternative is to purchase long-term care insurance. Benefits are triggered when a licensed healthcare practitioner (usually a doctor) certifies you are unable to perform at least two of the six “activities of daily living” for a period expected to last at least 90 days OR you have cognitive impairment requiring substantial supervision.
The price for long-term care expenses continues to increase and could pose a huge drain on your savings if you do not have long-term care insurance and/or have not adequately prepared for the costs of long-term care. The Genworth 2017 Cost of Care Survey listed the national annual cost for the following common services:
The expenses associated with long-term care go beyond medical and nursing care. It includes all the assistance you need if you ever have an illness or disability that leaves you unable to care for yourself for an extended period of time. Long-term care insurance will pay long-term services and support, including personal and custodial care, in settings such as your home, a community organization, or other facility.
According to Todd Stein, national long-term care specialist at xACSIA Partners Insurance Agency LLC, “The greatest benefit of long-term care insurance is protecting those you love from the physical or financial responsibilities of caregiving. My clients who have this coverage tell me it provides them peace of mind, so they can move forward in retirement. They are free to spend their money however they choose and not have to worry about covering costs in the very likely event they will require long-term care.”
Long-term care insurance is a difficult type of insurance to buy because it requires a cost-benefit analysis in many different areas and requires assumptions about future events that are tough to accurately predict. Here are eight aspects you should consider when looking to obtain long-term care coverage:
If you do not own a business, the proportion of the premium paid that is deductible as a medical expense depends on your age(s):
Age: 2018 Maximum Deductible Premium Limit:
Over 70 $5,200 annually
61 through 70 $4,160 annually
51 through 60 $1,560 annually
41 through 50 $780 annually
40 or younger $420 annually
Contact us to learn more about the important benefits of long-term care insurance. We can help you avoid the financial and emotional stress that a long-term care event places on a family. Let’s put a sturdy “financial fence” at the top of the cliff, rather than hoping there is an “ambulance in the valley” below.
By transferring a small portion from your estate now, you can ensure that the rest of your estate remains intact to enjoy in your retirement, while potentially also leaving funds for your heirs. Self-insuring this risk is financially dangerous to say the least–given the high probability of a long-term care event occurring. I so wish we had purchased something for my mother to help offset the steep cost of care we ultimately faced.
Knowing that money is provided and purchased at a discount, with care in a supportive and nurturing environment is what I want for my wife and me. I am guessing that is what you would want for yourself as well. The good news is today, it can be done . . .
Written by R. J. Kelly – May 2018
Founder & Chief Visionary Officer
Wealth Legacy Group®, Inc.