One Thing You Should Never Tell Your Aging Investors

One Thing You Should Never Tell Your Aging Investors

Dec 30, 2020 | aging, aging in place, aging investor, cost of aging, cost of long term care, elder investor, elderly, finances for elders, financial advisors, handling money for seniors, investor, long term care, medicare, retirement planning, senior investor, seniors finances

In retirement planning discussions, we see this statement financial professionals often publish for their clients:

“The average lifetime out of pocket costs for healthcare for a 65 year old couple retiring today is $285,000.”

Why should you never say this? It’s misleading at best and at worst, it’s false. From my own research as to where the number came from, I found it in government sources calculating Medicare deductibles and supplemental insurance payments, and co-pays Medicare does not cover. Generally, the out of pocket calculation refers to non-covered “medical” costs. But when that term gets diluted to mean “healthcare” it is far too broad and it simply ignores the reality that long term care is indeed healthcare. Medicare does not cover that at all, except for limited stays in skilled nursing homes following hospitalizations. It is noteworthy that when the Federal government uses data to calculate what out of pocket medical costs will be, the subject of long term care is entirely omitted.

The “average” lifetime cost of long-term care for two people in this country is far greater than $285,000. According to research by long term care insurance provider, Genworth, seven in ten people will need long term care at some point in their lives.

The comprehensive Genworth cost of care study, done annually, was published for 2020. Consider that at some point, with longevity being as it is, an older person with multiple medical conditions may need 24/7 care. Almost everyone will tell the advisor that he or she wants to stay at home and age in place. What will that cost at home in any of the most expensive states? In California, for example, the median cost of in-home care with a non-licensed caregiver full time, 27/7 is $252,000 per year! This is not medical care, in the sense that no skilled nursing is part of it, no doctor’s prescription is involved, and the agencies that supply unlicensed home care workers can charge whatever the market will bear.

A truthful financial professional will never mislead aging clients, or those planning for retirement by telling them that all they have to worry about for their future out of pocket healthcare costs is $285,000. Prudent financial advisors will themselves look annually at the Genworth study and help clients calculate the costs of long-term care, which every person should know about.

Costs of care, whether at home, in an adult day health center, in assisted living or in a skilled nursing facility vary widely from state to state. Looking at national median costs can be of little benefit to anyone doing retirement planning. Instead, using data from the Genworth study, one can look state by state for the real, most applicable numbers derived from where your client lives or plans to retire.

From my perspective, financial advisors are not educated to fully understand the difference between government provided statistics about out of pocket, non-Medicare covered medical costs and what we mean by long term care. They are quite different terms. It is distressing to me, with substantial experience in nursing, to see the fallacy of statements published by financial professionals about what retirement planning should include. Clients will be shocked to find that their own experience with having to pay for long term care out of pocket is not what their own advisor told them years before.

If you are in the retirement planning business and you want to serve your clients well, bear in mind that the data telling us that seven in ten people will need long term care at some point is likely true. Don’t fool yourself into thinking that retirement planning is just fine if a couple puts away enough to generate $285,000 for out of pocket medical costs. They also need to plan for how to pay for long term care, which they are statistically likely to need. That cost can destroy the most carefully laid plans for retirement income.

As a real-life example, take a client of ours, “George” at AgingParents.com, where we offer advice and guidance to families with aging loved ones. The advice encompasses legal, financial and healthcare issues as well as diminished capacity issues. George is 98 years of age and still sharp, though with some memory loss problems. He was wealthy at one point, after two successful careers. He owns his own home and wants to stay there for the rest of his days. His physical health is fragile and he now needs 24/7 help. He hired a good agency to provide in-home care. He spends in excess of $300,000 a year for caregiving alone, not counting the cost of everything else involved in home ownership, food, recreation, and out of pocket medical costs. Those medical costs involve dental surgery and equipment he needs at home. He has less than $400,000 left in savings. What if he lives another two to four years?

As you can see from this example, George is not a rare case. Many people do live into their 90s and beyond. Many start out with financial security, only to see assets rapidly depleted as the cost of care escalates to heights no one wanted to think about in retirement planning.

The Takeway

If you pride yourself in doing great retirement planning with clients, get real. Sit down with the data and find out what your clients might expect to need if they live long and require help at home or elsewhere. Tell the truth about it. If they need long-term care insurance to feel secure, talk about it. If they have sufficient assets to make it to 100 or so with full time care, they don’t need to get long term care insurance but they will need to have access to sufficient cash to cover the actual, not fantasy, costs. Above all, be clear in your own mind about what “out of pocket medical costs” means as compared with long term care costs. You are the key to these honest calculations. You can be the hero of the retirement planning story when you present an honest picture to every client you have.

By Carolyn L. Rosenblatt, RN, Attorney, AgingInvestor.com

About Carolyn Rosenblatt and Dr. Mikol Davis

Carolyn Rosenblatt and Dr. Mikol Davis are co-authors of The Family Guide to Aging Parents (www.agingparents.com) and Succeed With Senior Clients: A Financial Advisors Guide To Best Practices and Hidden Truths About Retirement and Long Term Care. Rosenblatt, a registered nurse and elder law attorney, has more than 45 years combined experience in her professions. She has been quoted in the New York Times and, Wall Street Journal, Money magazine and many other publications. Davis, a clinical psychologist and gerontologist, has more than 44 years experience as a mental health provider. In addition to serving his patients, Davis creates online courses and products to assist professionals and the public with understanding aging issues. Rosenblatt and Davis have been married for 36 years.

 

Financial Wellness and Physical/Mental Wellness: Are They Related?

Financial Wellness and Physical/Mental Wellness: Are They Related?

Oct 9, 2020 | aging, aging investor, elder investor, elderly, finances for elders, financial advisors, financial capacity, financial judgement, handling money for aging parents, senior investor

Financial professionals often use the term “financial wellness”, referring to a client’s comfort level with their assets in retirement. That sounds good. But is there any connection between finances and wellness of the body and mind in retirement? Perhaps there is a vague belief that if you’re financially secure, all is well. In reality, how much money you have does not automatically make you physically nor mentally well, nor does it protect anyone against the one thing many people fear most: Alzheimer’s disease. Dementias are no respecters of the wealthy. No one is immune to brain disease.

You may hear the well-worn adage, “Without your health, you have nothing”. OK, that’s not completely true either. Even with declining health related to aging, you may still have excellent quality of life. That is a matter of perspective, and a matter of using assets you have to make the most of life, even with disabling conditions. The one factor that makes for a more secure longevity is what you can afford in terms of care, as aging takes its toll on independence.

Research clearly shows that how we live our lives, our healthy habits or lack of them is responsible for about 70% of how we age. Aging is different for each person, with the other 30% of the picture directed by genetics. Suppose you have a client with longevity running in the family. That may affect your client’s life span but it will not guarantee a great “health span”; i.e., how long one is healthy. What we already see with our aging population is an increase in disabling illnesses in seniors coping with diabetes, heart disease, obesity, high blood pressure and yes, Alzheimer’s disease and other dementias. Genetically predisposed to live long? How fun can it be to live to be 100 if you have a combination of these illnesses, cutting off the things that make life worth living for most of us?

It is extremely unlikely that any financial professional is going to convince a client to lose weight, exercise, stop smoking or cut out junk food so they can enjoy retirement more. That’s not your job. Managing assets is your job and the assurance you can provide is that your client, with a strategically managed investment portfolio, will be able to afford high quality care in old age.

What does high quality care mean for one’s retirement years? It means that if enough assets are available, your client will never have to go to a nursing home. It means that they can afford well trained caregivers at home from high quality agencies, licensed, bonded and insured.

Here’s an example from real life with one of our clients at AgingParents.com, the companion site to AgingInvestor.com. Timothy is 97 years old, living in a lovely home he’s been in since 1960. He is widowed. He needs a walker. He doesn’t cook for himself. He’s very alert but with lung disease, he’s frail. He has a high-end agency providing care management as well as caregivers day and night. He has the means and the right to spend his last days in his own home. Even if his health deteriorates further, he can afford a Registered Nurse to oversee his treatment or give additional skilled care to him at home. Licensed home health agencies can give skilled nursing to anyone at home for a price. A concierge physician can also visit him at home and direct the medical treatment for any illness or chronic condition. That is high quality care, and it comes only at a high quality price.

If you are in the business of managing client assets as they age, don’t just talk about how fun retirement will look at age 90 because they have plenty to spend. That may not be true at all if health is an issue. At that age, declining health is usually problematic. Be truthful. Let your clients know about how you are working to protect them in longevity, no matter what health conditions they may face. That protective spirit feels good to people, knowing you’re watching out for them and that you support the notion of staying in one’s home to the end of life. You have foresight they may lack. And you know the dollars they’ll need for what is likely to become necessary with long life.

If you do not know details of just what dollars those are, the nuts and bolts of how much it actually costs to pay for the numerous kinds of care a person may need, you can quickly find out. It’s laid out for you in our book, Hidden Truths About Retirement & Long Term Care, available at AgingInvestor.com and on Amazon. Increase your expertise! Get your copy today by clicking here

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

Where Will Your Client Live In Older Age?

Where Will Your Client Live In Older Age?

Jan 30, 2019 | aging, aging in place, cost of aging, cost of long term care, declining health, diminished cognition, elderly, finances for elders, financial advisors, financial capacity, handling money for seniors, long term care, nursing home

Most advisors who even ask this question of their retirement-aged clients never spend time on it. About 90% of those asked say they want to remain in their own homes as long as possible.  That sounds fine. Until one faces physical decline, cognitive impairment or both. The advisor providing competent guidance about financing aging at home had better know the facts.

None of us like to think about losing physical ability or needing help. We abhor the thought of losing our total independence. In our view at AgingInvestor.com, the only advice clients are getting is about the long term picture is whether or not to purchase long term care insurance. Since most people don't do that, the actual costs of living at home can boggle the mind. It's the best advisor's obligation to educate your client about the risks of the plan to age in place, just as it is your obligation to educate them about balancing their portfolios. You are giving the client added value if you take the time to talk them through the risks and dollars they may need to have available.

Here are some briefly stated facts from a real case in which an 89 year old wanted to age in place and his wife promised he would never have to leave home.

At the outset of his declining health, he had about $3M in invested assets. His portfolio was healthy and balanced for his age, according to conventional wisdom. He began to lose his ability to walk due to multiple medical problems. His wife hired home helpers, three days a week at first. As his conditions progressed he needed more and more help.  He had to have a wheelchair, and a special van. A stair chair was installed in their two-story home. By the time he reached age 95, he was spending over $150,000 a year on care and assistance around the clock. In the space of time during which he was steadily losing independence until he passed away at 95, his assets were depleted to the tune of $2M. He lived in a higher end market for the needed help but the reality is that in any market, the kind of care he needed would be very expensive.

For him, aging in place was more costly than a skilled nursing facility would have been. Home modifications, private caregivers, (none of whom were licensed nurses), equipment, medications, adaptive devices, etc. drained his resources by 2/3. And not everyone has as much invested as he had to even start the journey. His wife had her own assets and she paid the cost of household maintenance, taxes, food, and utilities with her funds. Had she relied on him for those things too, there would likely have been little left at the end of his life.

It is not all doom and gloom however. Many clients live rather well in their last years without all the care this gentleman needed.  Some get by with family caregiving help, and some have fewer medical conditions. But if you are going to competently help your clients plan for longevity, it's essential to understand the real out of pocket costs of aging in place or anywhere else outside the home. If you want to add value to your services to older clients, know what they need to know to properly anticipate what can happen with living into one's 90s and beyond.

Learn all the actual costs of care for every aging client option in our book, Hidden Truths About Retirement & Long Term Care. Be well prepared to walk your client through the scenarios they could face in their futures.  You distinguish yourself from other advisors when you sharpen your knowledge in planning for longevity.

 

By Carolyn Rosenblatt, RN, Attorney, AgingInvestor.com

One Thing Advisors Should Never Do In Retirement Planning

One Thing Advisors Should Never Do In Retirement Planning

Mar 6, 2017 | aging, elderly, long term care

I recently saw an article about retirement planning, describing that one should consider where nursing home care is the most affordable and think about moving there. As if it were in the category of nicest cities to retire in or best recreational opportunities. I am appalled when I see these comments. For openers, no one I've ever met would choose a nursing home for long-term care if any other possible option were available. If a client can afford any other arrangement, try planning for that. Consider home care, adult day services, home health agencies and whatever long term care insurance can cover. Never tell them to plan for a nursing home.

There are of course good, well-run nursing homes where long-term care is delivered competently and with skill. Unfortunately there are a lot of other nursing homes where the opposite is true. In my opinion as one who has worked in them as an aide and an RN and who has sued a few as a lawyer, I can only urge caution. They can be dangerous places.

In our society, we do not have special nursing homes for elders who were, at an earlier time in life, convicted of serious crimes. We do not have special nursing homes for those who suffer from mental illness. If the resident does not have mental symptoms serious enough to be placed in a mental hospital, particularly if skilled nursing care is needed for physical conditions, the mentally ill elderly are in the same place as your Grandma, your client or anyone else. Many people with dementia are also cared for in nursing homes. Some have separate units for dementia care but others do not. There are behavior issues with these residents that can and do affect other residents.

Nursing homes are referred to as "skilled nursing facilities" (SNFs), long-term care facilities, rehab facilities and care homes. No matter what you call them, good care can happen and danger may lurk as well in any of them.

Planning for long term care is an essential part of planning for retirement. Nearly 70% of us are going to need that care at some point. If your client needs full time 24/7 care in the future, plan for the possibility of paying for it at home. Many aspects of care, including skilled care can be delivered through licensed home health agencies. Planning for a last resort that is risky does not seem the best way to plan for one's later years.

Here are three reasons why you should avoid telling your client to live where there are affordable nursing homes. That assumes that your client would have to accept living in one.

  1. Abuse from other residents

A recent study of New York nursing homes conducted over one month found that, conservatively, one in five nursing home residents are the victims of abuse by other residents. Rates of abuse were significantly higher when nurse aides have a higher numbers of residents to care for and in dementia units. Most of the abuse was verbal, but some involved hitting (11.3%) or pushing (10.3%) and a smaller percent that were sexual.

  1. Overuse of antipsychotic drugs

The Independent Drug Information Service reports that antipsychotic medications are often overused in older patients in nursing homes, and they increase risk of death and can cause substantial side effects.

  1. Risk of eviction if a client outlives her assets

An expert in the field is Pat McGinnis, Executive Director of California Advocates for Nursing Home Reform. She sees long term care residents who are out of money being tossed out of some homes in favor of residents who can pay the high cost of living there. She stated “there is an epidemic of illegal and unsafe evictions from nursing homes throughout the state and this (referring to an eviction case) is perhaps the worst case I have ever seen. Nursing homes increasingly focus on higher paying therapy residents at the expense of poorer long-term or 'custodial' residents. When residents threaten this profit-making model, they all too often are thrown out illegally.”

There is no question that the complexity of some medical conditions and the need for skilled nursing around the clock makes it necessary for some older folks to live in nursing homes. Every person who plans to retire and is realistically looking ahead must recognize that she may need help one day and that help might get very expensive.

Any professional discussing retirement assets, spending, budgeting and how to stretch a client's money over many years of retirement should include the discussion about the last years and the cost of care. I am an advocate for using every conceivable alternative to nursing homes for planning purposes. Although a few are innovative and patient-centered, too many look and feel like a hospital, not a place to stay long term. Do your best planning to keep your clients at home with long-term care in place.

by Carolyn Rosenblatt, RN, Elder Law Attorney, & Dr. Mikol Davis, Gerontologist co-founders AgingInvestor.com