Mar 25, 2016 | aging, elderly, finances for elders, financial capacity, handling money for aging parents, handling money for seniors, senior investor
How well do your calculation tools work to figure out if your aging client’s money will last?
Here’s a real case where the calculations are a serious problem.
A wealthy 87 year old woman with three million dollars left in her formerly extensive portfolio needs full time care long term. Her financial advisor, together with the bank trustee managing her assets used calculation tools to figure out how to make her assets last for her lifetime. Somehow, they failed to anticipate the actual cost of caring for an elder with physical conditions and illnesses that require 24/7 care. This is a woman with advanced cardiac disease who had open heart surgery. Her daughter, who is a professional, left her self-employment to care for her mother full time.
The caregiving daughter wants some compensation from mom’s millions. She indeed deserves it.
Further, the life expectancy the trustee and advisor chose as a basis for determining how long her assets would have to last was 100 years of age. Given her medical issues, no doctor treating her would agree with that estimate. Far from it. Her heart is simply wearing out.
While cash is being drawn down monthly for her essential expenses for care at her daughter’s home, no one calculated the cost to her daughter, who is losing a six-figure income in providing the needed care. Being with her daughter is the mother’s preference. And her daughter is taking excellent care of her.
The brother, who is eager to get his “share” of an inheritance is hovering around the trustee, demanding to know how much is being spent to care for mom and why the caregiving sister should get compensation to make up for her losses, even partially. He resents his sister for asking for compensation for caregiving.
What could you, as an advisor do to prevent or mitigate family conflict like this when planning for an aging client’s future? Here are some tips:
- When using tools to calculate life expectancy, take into consideration your client’s medical condition. Get real data from your client or from involved family. And update your information and calculations as age takes its toll. A person in fragile health with numerous life threatening conditions is very unlikely to live to 100.
- Take into consideration that about 70% of people today will need long term care at some point. In the client’s case described above, the minimum cost of care for her is $12,000 a month. That does not include bookkeeping, a driver, nor medication management. That figure covers a full time, 24/7 non-medical home care worker only.
- Assume that if your client has adult children willing to provide care, a wealthy client can and should compensate the caregiving adult child. What is “fair” should be based on market rates for service provided and the cost of what the adult child has to give up, such as quitting a job.
Calculation models may be inadequate to build in these details. The smart advisor will use good sense and knowledge of your client’s needs and preferences to adjust planned drawdowns to meet those needs.
Are you taking your client’s health care needs into consideration in forecasting the need for cash as she ages? Is this creating any problems for you in planning? We want to hear from you with any issues you have. Comments welcome!
If you want to learn more about what to do when your client develops dementia, get your one hour accredited CE online course, Best Practices With Aging Clients and start increasing your expertise today!
Carolyn Rosenblatt, RN, Elder Law Attorney, AgingInvestor.com
Mar 3, 2016 | aging, elderly, long term care, seniors finances
When meeting with a group of young business owners and CEOs recently, Mikol and I were were amazed that these folks were so forward thinking about their parents. We had been invited to come and discuss a variety of issues they saw in planning for their parents’ futures. All are 40 years old or younger. With their own thriving businesses, they felt responsibility to share with parents who were probably going to be depending on them or already were doing so. Their foresight is likely related to their business success as well.
The cost of long term care arose. What if you have to pay for them to get the care they need later on, even if they don’t need it yet? How much should a person set aside?
Some had purchased long term care insurance for a parent and we were happy to see that good planning. Others figured they’d have to pay out of pocket when the need arose.
While only about a third of aging folks believe they will indeed need long term care, the fact is that about two-thirds of them actually will need it. The gap between what older people think and expect and what really happens as we age is startling. And it is likely to throw the burden of paying for it on the financially successful adult children of these elders in denial. This particular group of business owners could absorb the cost. Many average people cannot. Many people, women in particular have to eventually quit their jobs or give up their own retirement time to care for parents themselves.
What about the dollars and cents? The Genworth Cost of Care Survey is done every year and provides average rates charged by service providers for homemaker services, home health aides, adult day health, assisted living and nursing home care across the country. And you can also search by state to see the average where your parents live. Even the lowest level of care, someone to come in and help with cooking, shopping, laundry and errands averages $19 per hour, the national median hourly rate. The national median monthly rate for assisted living is $3500. And in my state, in urban areas and well populated centers, it is twice that.
If you have to consider paying for long term help for your aging loved ones, it’s worth your time to do the math and figure out how much it may take. According to a colleague who knows long term care insurance benefits, the average time a person with this kind of insurance is collecting paymentsis three years or less. If it’s three years at $43,200 a year for assisted living, not factoring in the 2% annual increase in cost, that’s $129,600. And that’s under the unlikely scenario that a person who lives into her 90s, say, is going to stay level in what she needs over that three years. More likely than not, her needs will increase and the facility will charge more every month for more services. Here at AgingParents.com, we have had clients who are shelling out over $10,000 a month for a parent to be in assisted living. When parent is infirm and needs a lot of things from the staff, every new thing increases the monthly cost.
Near the end of our fruitful discussion, one of the participants asked “What do the other 99% in our society do when an aging parent needs long term care?” The answer: they either provide the care themselves at a very high personal cost, or their parent spends what assets he has until they’re gone. Then he ends up on Medicaid in a shared little rom in a nursing home. Longevity is great when they’re healthy. When they’re not, we need to be conscious of the cost of taking care of our loved ones.
If it so happens that you are the successful adult child of an aging parent with limited funds, here are four takeaway suggestions:
- Look ahead. If your parents aren’t wealthy and you are, guess who will be expected to help financially?
- If your parents or you can afford it, seriously consider long term care insurance. If you wait too long to apply, the cost rises sharply and some diagnoses and conditions make an elder uninsurable. Dementia is one of those diagnoses.
- Educate yourself. If you expect to pay out of pocket in the event that your loved one needs help at home or elsewhere, do the math and figure out how much cash you will probably need to set aside. The longer our aging parents live, the more likely they will need help.
- Communicate with your aging parents about these issues. Insist on the discussion. You need to know what assets they have and where to find them. They may not have planned on living so long and potentially outliving their money but you need to anticipate that possibility.
Smart planning now can save you shock and distress later. Working with your aging parents to help them stretch their assets by conservative investing and spending will benefit both you and them in the long run. And expect the long run. People in the 85+ age group are the fastest growing segment of our population.
Get more specifics on these issues and the possibility of getting public benefits for eligible aging parents in my new book, The Family Guide to Aging Parents. Get your copy today by clicking here!
Carolyn Rosenblatt, RN, Attorney, Author
Dr. Mikol Davis, Geriatric Psychologist
AgingParents.com and AgingInvestor.com
P.S. If you read up on what to say before you approach your aging parents about finances, the conversation will go better. Tips are in the book!
Jul 30, 2014 | aging, elderly, finances for elders, long term care, seniors finances
Posted by Richard Eisenberg, July 29, 2014
Richard Eisenberg is the senior Web editor of the Money & Security and Work & Purpose channels of Next Avenue and Assistant Managing Editor for the site. Follow him on Twitter
@richeis315.
Not-so-funny thing: For years, when I got together with my boomer friends and relatives, our kids would be Topic One. These days, it’s our aging parents. And, mostly, the conversation isn’t cheery.
Typically, we talk about how our moms and dads are growing frailer and about the caregiving they need (my father will soon turn 92 and has a full-time caregiver). But what’s often left unsaid is our nagging fear that our parents — living longer than they or we anticipated — will run out of money.
Then what?
Talking about this worry is generally taboo. We don’t want to come off sounding as though we’re wishing our parents’ lives will end soon to avoid a potential financial crisis for them and for us. Frankly, I’m a little jittery even writing about the subject.
(MORE: What Do We ‘Owe’ Our Parents?)
As New Yorker cartoonist Roz Chast put it in her poignant new graphic memoir about caring for her elderly parents, Can’t We Talk About Something More Pleasant?: “I felt like a disgusting person, worrying about the money.”
But the truth is: Longevity in the abstract is wonderful; in reality, it can be wonderful but can also be expensive and produce high anxiety for boomers. Ken Dychtwald, President and CEO of Age Wave, a consultant specializing in aging and boomers, calls it “the Caregiving Crunch.”
Virginia Morris, author of the excellent book, How to Care for Aging Parents, told me: “This is an enormous issue. If you’re not worried about it, you probably should be.”
(MORE: Checklist for Helping Parents With Their Finances)
A Ballooning Problem in America
With 6 million Americans now 85+, a number expected to hit 14 million by 2040, “this issue is just going to balloon tremendously. We’re just on the cusp,” said Stein Olavsrud, a certified financial planner at FBB Capital Partners in Easton, Md.
To pull together advice for people in their 50s and 60s who worry their parents’ money may run out, I turned to five experts: Morris; Olavsrud; Dychtwald; Cynthia Hutchins, Director of Gerontology at Merrill Lynch and Carolyn Rosenblatt, co-founder of AgingParents.com and a Forbes columnist.
First, a caveat: “This is a severe problem with not a lot of great answers,” said Olavsrud. As Dychtwald told me: “There’s no magic solution; there’s no button on the wall where a million dollars will come down a funnel.”
What’s especially vexing, Dychtwald added, is that the timing and size of the problem is often unknown. “If you have a nine-year-old, you can predict when they’ll go to college and plan for it,” he said. “But how does one know when one’s parents will need money or a nursing home?”
Put Yourself First
One point all the pros I spoke with agreed on: Don’t assume you’ll need to urgently tap your own savings to deal with this problem.
“People’s first reaction is often: ‘I have to pay for this myself,’” said Morris. “I’d urge you to be extraordinarily cautious about jumping into that. You have your own retirement, and possibly your kids’ college, to think about.”
(MORE: Has Your Elderly Parent Become Your Midlife Crisis?)
Added Olavsrud: “Put yourself first, even if that feels like a selfish decision.”
6 Tips For Fearful Boomers
Here are six recommendations from my team of experts:
1. First, talk with your parents about your concerns — the earlier the better. “The sooner you start talking about these issues, the more options you’ll have,” said Morris.
Yes, raising the subject is uncomfortable. A 2013 Merrill Lynch survey of people 50+ found that 70 percent of them haven’t had in-depth discussions with their parents about topics such as their net worth or how to pay for long-term care.
“People need to expect their parents will become infirm before they die and they’ll have to have a conversation on how everyone is going to manage that,” said Rosenblatt.
Once you begin talking candidly with your parents, “you’ll discover their wishes and can then weigh them against your own financial situation,” said Hutchins.
2. Meet with one or more professionals who can offer strategic advice. It could be an eldercare attorney for Medicaid planning (you can find one through the National Academy of Elder Law Attorneys or National Elder Law Foundation site). In most states, Rosenblatt noted, Medicaid will pay for a nursing home but not for a caregiver in your parent’s home.
Alternatively, you might consult a financial planner or, if you want advice on caregiving costs and choices, a geriatric care manager (visit the National Association of Professional Geriatric Care Managers site).
Rosenblatt advised also getting “the medical part of the picture” by speaking with your parents’ doctors about their diagnoses. “Then, you’ll have a clue whether your parent will need full-time care down the road,” she said.
3. Scour for money-saving benefits your parents may be entitled to receive. Three useful sites to dig up this information: The National Council on Aging’s BenefitsCheckUp; the federal collaborative, Benefits.gov and The U.S. Administration on Aging’s Eldercare.gov.
4. See what your parents could do to improve their financial situation. “Think of creative solutions,” said Morris. “Maybe your parent can have a renter move in and help with household chores. Or two elderly friends could move in together to save on housing costs.”
Your mother and father might be able to reduce their costs and add to their savings by downsizing or — said Olavsrud — selling assets (such as jewelry or antiques).
If they’ve lived in their house for many years, they could look into tapping their home equity with a reverse mortgage. The money would be repaid when they sell the house or upon their death. Just bear in mind that a reverse mortgage is a complicated financial product, so your parents will want to get objective counseling about it before committing.
5. If your mom or dad will need to move into a long-term care facility, look into whether the cost is negotiable. Bear in mind that some nursing homes won’t even accept people on Medicaid (let alone negotiate the expense) because of the government’s low reimbursement rate.
That said, I know someone who met with the management of a nonprofit assisted living complex and worked out a “scholarship” arrangement for his mother. He demonstrated that there’d be enough cash to pay for three years’ worth of care there and the staffer said the facility wouldn’t evict her if the money ran out after that.
6. Instead of paying for your parent’s care outright, make it a loan. You could structure the loan so you’ll be repaid upon your mother or father’s death or from proceeds of the sale of their house. A longtime friend of mine did this, loaning $40,000 to his parents with the proviso that he’d get the money back when their house sold (figuring he’d then use that money to help pay for their long-term care).
His dad died a year ago and the house is now on the market. He recently moved his financially-strapped 84-year-old mother from her Washington, D.C. suburb into a $6,600-a-month assisted living facility 45 miles away from him in northern California.
But his money concerns about his mom are hardly over. “I still have sleepless nights about the ‘what if’s,’” he told me.
So do many of us.
We can do the experiment for you and come out with a writing a discussion chapter for thesis perfect write essay online report.
