Wealthy Clients Supporting Their Elders–How Much Will It Cost?

Wealthy Clients Supporting Their Elders–How Much Will It Cost?

Jan 23, 2017 | elderly, finances for elders, handling money for aging parents, handling money for seniors, long term care

We at AgingInvestor.com met with some forward thinking business owners, all under age 40, expressing their concerns about their aging parents. They weren't sure what should be set aside or what to plan for their loved ones. Any of these business owners could be your HNW clients.

 

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.

 

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.  Some of their parents never had much wealth. Others have depleted their assets by outliving them or by other factors.

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 a client's 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 your clients must consider paying for long term help for their aging loved ones, it’s planning you need to do with them. It's a special fund or targeted assets to be used for aging parents as needed.

 

Educate yourself first. 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 collects policy benefits is 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.  We see 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. A few years of that kind of expense can take its toll on your client's retirement planning.

 

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. No one wants to see that happen if you can help it.

 

Here are the takeaways to share with your HNW clients who may end up supporting aging parents or paying for their care.

  1. Look ahead.  Discuss what needs your client's family, particularly elders may have and what may be required from your client to meet potential obligations created by their family members.
  2.  Consider whether your client should buy long term care insurance for parents if their parents are not wealthy and have health issues. Do this before their parents turn 60 if you can. The elders may become uninsurable or premium cost may become prohibitive later.
  3. Educate your client about the real costs of long term care. If they're under 40 as our audience was, they are probably not thinking about their potential future obligations to parents who are not financially successful. This was an unusual group.

 

Smart planning now can save your client shock and distress later.  If they are responsible folks, help them to expect the long run as their parents age. People in the 85+ age group are the fastest growing segment of our population. Most of these elders are not wealthy and someone will need to care for them.

 

Your client can get a great head start with planning and communicating well with elders in our book, The Family Guide to Aging Parents. It can help YOU too, if you are in the situation of caring for your own aging loved ones. Click here for your copy.

 

Carolyn Rosenblatt, RN, Attorney, AgingInvestor.com and AgingParents.com

What Is The Real Cost of Long Term Care For Aging Clients?

What Is The Real Cost of Long Term Care For Aging Clients?

Jan 16, 2017 | aging, finances for elders, long term care, long term care insurance, medicare

Are you doing retirement planning with your clients? Do you understand the real dollars involved in long term care? It goes way beyond out of pocket medical expenses for Medicare premiums, supplemental insurance and medicines. You need to help them free up enough to pay for it.

We are indeed living longer now due to advances in medicine and technology but what is the condition we're in with longevity? It's not true that we're living healthier than the prior generation.

No one wants to talk about the reality that things like obesity, in 30-35% of Boomers are going to affect whether they need to pay for lots of things Medicare does not cover. Obesity is frequently associated with significantly greater risk for heart disease, strokes and diabetes. Boomers have the highest rates of obesity of any age group in the U.S. If you want to pick conditions that are most likely to result in the need for long term care, all of these are among them.

Retirement planning can be very tricky when it comes to considering the cost of long term care. Most people don't want to have a conversation about what would happen if they became disabled. Most would rather change the subject quickly if the issue of possible diminished capacity is raised. "That's NOT going to happen to me!" is the expected response. But the risk is real, and there are plenty of statistics to support an analysis of what it costs to care for a person with disabling health conditions.

According to the Genworth Cost of Care Survey, which comes out annually, 70% of people over the age of 65 will need some kind of long term support as they age. At AgingInvestor.com, we recommend that every financial professional have the latest study on hand and that you share it with your clients when you do retirement planning. Chances are they are not as healthy as their parents were. And what kind of care will they need?

Most people want to stay at home as they age. Many will use home care services to be able to stay at home. Here's an example. My now 94 year old mother in law, Alice, had numerous hospitalizations for a couple of months, for blood pressure issues, the flu and other problems. She simply wasn't safe living independently in her apartment as she recovered. A home care worker came in every day for a cost of $25 per hour, initially for 12 hours a day. That cost is not paid by Medicare.

She's a good example of how we can need care with advanced age even if we do things right. She has always taken good care of herself, doesn't smoke, doesn't abuse alcohol, exercises regularly and keeps her weight in normal range. And yet, after illness she needed 24/7 care. The overall out of pocket costs associated with that bout of illness approached $10,000. She's fairly tough and did recover fully. However at her age that is not what usually happens. Home care could be needed indefinitely at a cost even part-time of at least $20,000 per year.

The extra $20,000 a year any less resilient elder could need is for someone who has neither heart disease nor diabetes. Chronic illnesses put a person at even greater risk of needing expensive care. Full time around the clock help can run $250,000 per year and up, depending on geographic area market rates.

Here's the takeaway: Expect that anyone who reaches the age of 80 is much more likely than not to need cash to pay for help of some kind. If your client is overweight or obese, the risk is very high. Ditto if your client smokes. Be sure to plan for making cash available to cover your client's likely needs in his later years. Most of what is usually required is not covered by either Medicare nor supplemental "Medigap" insurance.

By Carolyn Rosenblatt, RN, Attorney, AgingParents.com and AgingInvestor.com

Will Your Senior Clients Be Harmed When Obamacare Is Repealed?

Will Your Senior Clients Be Harmed When Obamacare Is Repealed?

Dec 21, 2016 | aging, elderly, finances for elders, handling money for aging parents, long term care, Obama care

The short answer is "yes", unless every one of them is high net worth. For those who are very wealthy, there will be no effect as they will pay out of pocket. However for any client who lives long enough to spend down everything and to get low on funds the effect will be palpable. Though neither party is talking about what happens to seniors of modest means with the repeal of the Affordable Care Act here's the hidden truth.

Low income seniors who could not afford the high cost of long term care had no choice when they ran out of money except a nursing home. Until Congress passed legislation called Community First Choice (CFC), that is. This is a bipartisan supported program that is optional for states. It gives seniors and disabled people a choice to remain at home and supports family caregivers. If a state adopts CFC, it receives extra federal funding (6%) to pay for personal attendant services. This funding is critical. States who want CFC must make the initial investment in home and community-based services before they see savings over the long run.

According to the National Council on Aging, eight states have adopted it so far and at least four more are applying for it or are considering applying. With our growing senior population it is right to give elders a choice of not having to go to a nursing home, a fate many dread and fear.

Even though care at home is normally cheaper and better than nursing home care, there is still a bias in our Federal law that compels states to pay for nursing home care, but not home care. It makes no sense. The CFC is an effort to eliminate the bias in the law favoring nursing home care and promote doing what is better for our elders: allowing them a way to pay for home care using family to provide it with financial support.

Repealing the ACA will de-fund this successful CFC program.

The Republican Platform states: "Our aging population must have access to safe and affordable care. Because most seniors desire to age at home, we will make homecare a priority in public policy and will implement programs to protect against elder abuse."

Really? If this is a priority, how has a helpful program for seniors been ignored in the dialog about the necessity repeal Obamacare? And what about the millions of people ages 55-64 who need health insurance and can't afford it? Expanded Medicaid and subsidies help them now. Those programs are on the chopping block in the oncoming rush to "cut government spending".

The elder and disabled adults who need Community First Choice funding and all community based efforts to keep them out of nursing homes are not marching in the streets. They need total care or help to maintain themselves at home. They are not in the news. They are a population without a voice except by aging organizations who fought for CFC in the first place. Any client who spends a fortune on long term care over years and depletes her assets could end up needing Medicaid. Those are the most at risk folks. No matter how skilled you are no one can make money last forever for those who are less than high net worth.

Do not be fooled into thinking that those who relish the idea of quickly trashing Obamacare really are concerned about what happens to low income seniors. These seniors comprise a significant part of our population. The elders with modest means and modest savings who need long term care can't pay for it. They are the ones being forced to go to a place they don't want to be.

The Money Follows the Person Program, which assists states in making home and community-based services more widely available expired in October 2016. If Congress is throwing out all things related to the Affordable Care Act, what are the chances of renewing this program?

If you have aging clients who might live long enough to run out of funds, this will directly affect what happens with them. If you are planning for them for lifelong financial safety, consider that much of what formerly was in place to keep them out of nursing homes will likely be gone should they live to be 100 and are no longer wealthy. Be sure to keep in mind that nursing homes are about three times the cost of staying at home with care in place there.

By Carolyn Rosenblatt, RN, Elder Law Attorney, Dr. Mikol Davis, Geriatric Psychologist, AgingInvestor.com

Three Tips For Talking To Your Older Clients About Long Term Care

Three Tips For Talking To Your Older Clients About Long Term Care

Sep 20, 2016 | aging, aging investor, diminished cognition, elder investor, elderly, finances for elders, financial advisors, financial capacity, handling money for aging parents, handling money for seniors, investor, log term care, long term care insurance, senior citizen investor, senior investor, seniors finances

Three Tips For Talking To Your Older Clients About Long Term Care

When you look at an older client's portfolio, the biggest concern is probably about whether they have enough to last to the end.  You calculate the drawdown, the earnings, and you spend time on those figures.  But what about long term care?

This is the conversation the client doesn't want to have.  No one wants to think about being disabled or losing independence.

Of course, this is not realistic.  You, the planner may not want to bring up the subject because of your own discomfort, or because you aren't sure what to say, or perhaps because your client dismisses it if you do bring it up. But a competent planner and advisor must do so.

Consider this realistic typical scenario:

A health crisis happens to your client. It can be a fall, a stroke or heart attack, anything that is unexpected. First, there is a hospitalization.  OK, Medicare covers that, together with supplemental insurance. A rehab facility is next with therapy and nursing care.  Medicare covers that but only to a point. When the elder is ready for discharge, the client and family are told, sometimes a day or two beforehand, that they will have to get help for the aging loved one at home.  ”Doesn’t Medicare cover that?” they ask. Unfortunately, no, they are told.

The Cost 

So the family members and the client start scrambling to provide help at home. In some parts of the country the cost is about $30 per hour.  According to the Genworth 2015 Cost of Care study, the national median price for someone to provide help with bathing, dressing and walking or other hands-on home help is $20/hour.

When you do the math, you realize that even if your client needs just twenty hours a week at the average cost, it will add up to nearly $20,000 a year.  That is on top of other, non-covered medical expenses, such as physical therapy when Medicare stops paying, hearing aids, and many medications. And that is just the beginning.  Limited hours of home care often stretch into full time care as people  who have disabling conditions age.

Some people figure they can spend their assets and give things away so they can qualify for Medicaid.  I would not recommend Medicaid as the best way to get quality care.  First, one must be really destitute to qualify for it. And the state looks back at all financial transactions for a five year period in most states prior to the application to see what was going on, what transfers were made and if they were honestly done. Second, the care one receives under Medicaid is the most basic, may be of the lowest quality and typically is not what anyone really wants.

If you can prevent that choice, you will.  Your client could spend her last days in a three bed room in a dingy nursing home if she or anyone in her life thinks Medicaid is a fine way to pay for care.

The cost for quality care at home can be staggering.  In my own prosperous county, with a very high elder population, the cost of 24/7 care at home from non-nursing providers (home care workers) exceeds $200,000 per year.  That is on top of the ordinary costs of living a senior has, regardless of care. And she will still be paying her out of pocket costs for other things Medicare does not cover: many medications, other non-covered services, Medicare premiums, etc.

 Taking On The Long Term Care Discussion: Three things you should do

  1. You need to create a plan for how to pay for long term care in the future as part of your job of financial planning and retirement planning.  Your client is not likely to ask you about it. Do not wait to have these discussions. Cash for the unexpected need for care could be a major expense. Your client needs to know the facts and figures.  Most people grossly underestimate the costs. We have even seen financial industry publications naively state "Medicare pays for most things". It doesn't pay for what most people need to stay at home after any disabling condition arises.
  1. Educate your client about the likelihood of this need for future care.About 70% of people will need long term care in some form in their futures.  Failure to plan for it can bankrupt a person or leave them in serious debt toward the end of life. Or some investments could make cash inaccessible when needed.
  1.  Use resources to help yourself understand the real costs of home care, assisted living, and nursing home care.  In order to educate your client, you need to educate yourself first. The Genworth Cost of Care study is a good resource. Here at AgingInvestor.com, we also offer tools[1] to help you.  Be sure you have something to hand to and to discuss with your client.  The need is now for any retiree.

by Carolyn Rosenblatt, RN, Elder Law Attorney & Dr. Mikol Davis, Geriatric Psychologist

AgingInvestor.com

[1] The Family Guide to Aging Parents: Answers to Your Legal, Healthcare and Financial Questions, and Succeed With Senior Clients: A Financial Advisor's Guide To Best Practices and Working With Aging Clients, A Guide for Legal, Business and Financial Professionals. All 3 books are available at AgingInvestor.com and Amazon.com

 

Are Advisors Miscalculating Retirement Medical Costs?

Are Advisors Miscalculating Retirement Medical Costs?

Aug 31, 2016 | aging, Alzheimer's disease, elder investor, elderly, finances for elders, financial advisors, handling money for aging parents, handling money for seniors

Are Advisors Miscalculating Retirement Medical Costs?

According to CNN Money, a 65-year-old, healthy couple can expect to spend $266,600 on out of pocket costs for Medicare premiums in retirement. If that's the advice you give clients about what needs to be set aside for medical expenses you're missing some major facts.

Medicare premiums are a relatively small part of what it can cost when health issues arise as people age. No one likes to discuss the subject of possible cognitive impairment, but it has to be done. We see it as the financial advisor's responsibility to bring it up, include medical expenses in the overall financial plan and get the truth out on the table.

According to a Wealth Management article on August 30, 2016, Fidelity Investments did a survey of over 350 advisors and found that 96 percent felt unprepared to help clients who had Alzheimer's disease. This is in contrast to the reality that a person's chances of developing the disease are at least one in three from age 85 and above. And we are living longer than ever in history. More centenarians, more Alzheimer's.

What is the real cost of caring for a person with Alzheimer's? I interviewed a high end home care agency owner about this question. Many HNW people do not have long term care insurance as they plan to pay for whatever they need out of pocket. Most are not aware of the cost of best quality 24/7 care they could need with their own longevity. In our work at AgingInvestor.com, we have encountered this scenario and have seen what best quality care looks like. It's not your average home care agency.

The cost for caring for one person at home with Alzheimer's from that agency is $300,000 per year. The workers are specially trained and well supervised. A care manager develops a plan and the workers take their shifts, prepared to deal with all manner of difficult dementia-related behavior, including violent acts and words, wandering out the door, refusing to bathe as well as those who are unable to express themselves verbally any longer. Non-specialty home care agencies do not accept this degree of client behavioral difficulty out of fear of their workers being harmed.

The ultra HNW client can pay for these costs but for everyone else, the expenses incurred with care for a progressive disease that escalates in difficulty over time could be devastating. The cost of home care is in the category "long term care" an often poorly understood subject among those outside the health care and insurance fields.

If you have clients who are at retirement age or are retired, it is a necessity that you educate them about these risks to their savings. When you work with them on their plans, you need to include the possibility, very real, that one or the other of a retired couple could develop dementia and need expensive home care. If you think they should just go onto Medicaid, think again. Every state has different rules but in all states a person can't have much left in the way of assets and savings in order to qualify for Medicaid. And most importantly, people typically want to stay at home as they age. The quality of care they are likely to receive on Medicaid for long term Alzheimer's care is low, and likely to be in a nursing home. No one wants that!

The takeaways

  1. In developing retirement plans for clients consider the risk that your client may develop Alzheimer's disease or related dementia. Bring it up and talk about it.
  1. Plan for significant savings to be set aside in case care is needed, not just for Alzheimer's but for any long term condition or disabling illness requiring help. Use real numbers, not vague assumptions.
  1. Do not underestimate the real costs of caring for a person with this kind of dementia. It can last as long as 20 years. Do the math for your clients and show them what they would need to be cared for at home with a long term expensive illness like Alzheimer's.

The responsibility to know about long term care costs is yours. To learn more about Alzheimer's and how to spot the warning signs, get a free checklist to get you started at AgingInvestor.com.