How Will Baby Boomers Handle “Long-Term Caregiving?

Think Advisor’s article, “Long-Term Caregiving Realities Hit Home for Boomers” says that study participants responded that they’d be willing to do these things to provide care for a loved one:

  • Cut spending: 66%
  • Travel less frequently: 41%
  • Move to a new home: 27%
  • Work less: 27%
  • Stop working: 19%

The study also found that boomers are becoming more aware of the likelihood they’ll require retirement care, and are willing to discuss the issue. This group believed that an adult would start to need physical care or assistance at age 70 or older.

About 45% of study participants thought they’d need long-term care at some point. That number is an increase from 36% in 2013. A total of 66% of them reported that they’d had detailed conversations about how they wanted to receive long-term care. Slightly more than half said they’d had detailed conversations about how to pay for care.

Even so, about 30% of boomers in the study who were caregivers said they still had to use some retirement savings to pay for health care expenses, compared with 19% of those without caregiving responsibilities.

The U.S. Census Bureau says that older Americans are projected to outnumber children for the first time in U.S. history by 2035. This raises the question of who’ll care for the aging population.

It was no surprise that the study found that women were likelier than men to have caregiving experience. 62% of current or former caregivers among study participants were women and 38% were men. A total of 68% of those with caregiving experience said they knew about long-term care insurance, compared with 59% without such experience.

Experienced caregivers were also more likely than inexperienced boomers to have made preparations for their death. This includes communicating funeral preferences (49% vs. 41%), identifying where they wanted to be buried or cremated (51% vs. 37%) and maintaining an up-to-date estate plan (45% vs. 38%).

Reference: Think Advisor (August 8, 2019) “Long-Term Caregiving Realities Hit Home for Boomers”

 

How to Plan for Long-Term Care Costs

The odds are that most of us will need long-term care. At least 52% of those over age 65 will need some type of long-term care at some point in our lives, according to a study conducted by AARP. As most of us are living longer, we’ll probably need that care for a longer period of time, as reported in the article “It’s best to plan for long-term care” from the Times Herald-Record.

Here’s the problem: ignore this issue, and it won’t go away. This is a fairly common response for people 55 and older. The size of the problem makes it a bit overwhelming, and the cost to tackle it seems unsolvable. However, not addressing it becomes even more expensive. How can we possibly pay for long-term care insurance?

Here’s a simple example: a 64-year-old woman who broke her ankle in three places. She was healthy and mobile. However, a badly broken ankle required extensive rehabilitation and she was not able to stay in her home. She has been living at a rehabilitation center and the costs are mounting. What could she have done?

There are two basic ways (with a number of variations) to pay for long-term care.

The first and most obvious: purchase a long-term care insurance policy. Only 2.7 million Americans own these policies. They are wise to protect themselves and their families.

Most families put off buying this kind of insurance, because it’s expensive at any age and stage. The average cost is about $2,170, according to the Kiplinger Retirement Report, for about $328,000 worth of insurance. That rate varies, and it should be noted that if you have a chronic condition, you may not be able to purchase a policy at all.

If a local nursing home costs $216,000 per year and you have $328,000 of coverage, you’ll run out of coverage. The average nursing home stay is about two years. As boomers age, the cost of long-term care insurance is rising, while benefits are becoming skimpier, says Kiplinger.

There are some alternatives: a hybrid life insurance plan that includes long-term care coverage.  However, those can be more expensive than regular long-term care insurance. Try about $8,000 a year for a 55-year-old, about $13,000 for a 65-year-old.

Another choice: a Medicaid Asset Protection Trust. You’ll need to work with an estate planning attorney to create and fund this trust long before you actually need it. Your assets must be placed in the trust five years before an application to Medicaid, which will then pay for your care. You don’t have to live in poverty to do this. If the care is for one person, the applicant is permitted to keep about $15,450 of assets. The spouse may also keep a home worth up to $878,000 and assets up to about $120,000. In New York State, you can keep the principle of retirement funds like an IRA or 401(k), as long as you are taking the required distribution withdrawals.

However, what if you have money to pay or need long-term care before you put assets in trust? If you live in New York, Florida and Connecticut, you have what is called “spousal refusal.” The spouse of the person in long-term care can choose not to pay for their cost of care. This can get complicated, and Medicaid will try to get funds for the care. However, an estate planning elder law attorney can negotiate the amount of payment, which may leave the bulk of your estate intact.

These are complicated matters that become very costly, often at a time when you are least able to deal with yet another issue. Speak with an estate planning attorney before you need the care and learn how they can help you protect your spouse and your assets.

Reference: Times Herald-Record (July 22, 2019) “It’s best to plan for long-term care”

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