In March 2018, the U.S. Census Bureau reported that by 2030, all baby boomers will be over the age of 65, leading to a unique situation in demographics: 20 percent of U.S. residents will be retirement age. This is in part because life expectancy has increased. The Population Reference Bureau reports that “average U.S. life expectancy increased from 68 years in 1950 to 79 years in 2013, in large part due to the reduction in mortality at older ages.”
As health care has improved and life expectancies have extended, more people are living longer after they would traditionally have stopped working. This has led to a potential crisis for many Americans: how to pay for the typically increased amount of health care and assistance needed as the years march onward. It’s like an absurdist word problem in sixth grade math class: If you retire at 65 and need to enter an assisted living facility 10 years later, how much money will you need to pay for the impossible-to-predict level of potentially very expensive health care you’ll need over what could be a similarly hard-to-estimate 10- to 30-year or longer timeline?
These are critical questions that all older adults need to consider because most facilities rely primarily on private payment, and Medicare does not cover the cost of assisted living facilities, says Roxanne Sorensen, an Aging Life Care specialist and owner of Elder Care Solutions of WNY in Rochester, New York, a case management consultancy. “Medicare does not pay for any form of assisted living. It only pays for rehab in a nursing home for the first 100 days. After that, there’s no more assistance from the government unless you’re on Medicaid,” and Medicaid only kicks in once someone has spent down all of their assets and is essentially destitute. “People today are using their income and whatever assets they might have” to pay for assisted living when they need it.
It can be a tall order. According to a 2017 survey conducted by Genworth Financial, the median monthly cost for an assisted living community is $3,750 – totaling $45,000 annually. Long-term care by a home health aide tops $4,099 monthly or nearly $50,000 annually. And skilled nursing in a private room will set you back $8,121 per month, adding up to more than $97,000 per year.
These high costs are “all the more reason that we don’t only need to save for retirement, but we need to also save for the possibility of needing assisted living” in retirement, says Scott Tucker, president and founder of Scott Tucker Solutions, Inc., a Chicago-based financial planning company that specializes in helping clients plan for retirement. Saving early and often should form the foundation of your plan. “The key really is the stuff my grandpa told me. He was a World War II veteran. Folks like him who lived through the Depression; they always tried to save as much as they could and spend as little as they could.”
But for whatever reason, that lesson didn’t translate so well from the so-called greatest generation to their baby boomer children. “Generally, in the U.S., we see baby boomers and the younger generations not saving enough. The culture has changed and people are not saving enough,” so by the time they start thinking about retirement, often in their 50s or 60s, “there’s nothing to work with,” and the fear is, it might be too little too late by then.
It’s a tough topic to tackle, especially when so many of us are struggling to make ends meet today, much less think about what’s going to happen 40 years down the line. “What everyone wants to do is put this off until the kids are out of college, or until after Thanksgiving, or after we retire next year,” Tucker says, but this important planning needs to happen “much earlier, and folks are not realizing that.” Making plans at age 40 versus age 70 can make an enormous difference, Tucker says, noting that the younger you are when you start, the smaller the effort you’ll have to make to add up to enough savings later on. “Making some small changes younger makes this whole thing a lot easier.”
No matter when you start, there are a variety of ways to plan for retirement and finance assisted living, and finding an advocate or planner to help you navigate this complex world might be a great option for many families, Sorensen says. “It’s really complicated,” she says, but her business and many others like it across the country can help families navigate the complex questions of which facility to enter, how to pay for it and all the other complicated issues that can arise alongside these challenging questions. Sorensen and other case managers and advocates like her have extensive experience and understanding of this fractured system and relationships with assisted living facilities, meaning that they may be able to cut through some of the complexity much faster than the average person.
The bottom line is, “money is the key to everything. I hate to say it that way, because medical care and compassion are a part of it, but it’s lower on the totem pole,” she says of the problem of financing assisted living in America. It seems that if you have the money, you can buy those things. But it all starts with enough money to get you into an appropriate care situation.
There are a number of strategies you can use to fund assisted living and other long-term care options, including some of the most common ones outlined here:
Long-Term Care Insurance
Similar to health insurance, long-term care insurance ostensibly exists to cover you in the event that you need care in retirement. These policies are intended to cover your long-term health care needs. It may come into play for at-home care, an assisted living community or other long-term care facilities. Such policies can be a good option, but Tucker says this probably shouldn’t be your primary choice for funding assisted living because “the way these policies are constructed, they allow the company to change the premiums as you get older or to reduce the benefits if you can’t afford the higher premiums. It doesn’t always work out” the way you might expect it to.
Sorensen adds that there can be other challenges associated with accessing the benefits of these policies. “It’s like your car insurance or homeowner’s policy. You pay for them, but [the insurance companies] don’t want you to take advantage of them. They’re trying to find ways of not letting you use the benefits, so you have to jump through a lot of hoops to trigger that policy.” However, once they have been triggered, they may provide a good source of funding for your needs. Read the fine print and be sure you know what you’re buying if you purchase such a policy.
Life Insurance
Many life insurance policies include a provision for long-term care benefits. Tucker says these can be a good option for financing assisted living because these long-term care benefits are less changeable than those typically found in long-term care insurance policies, making them a potentially more stable option. Again, read the fine print and be sure you understand the terms of any agreement you sign. Also be sure to pay the policy as stipulated in the contract. “If you forget to pay the premium, they’ll cancel your policy,” Sorensen says, and then that money you invested in the plan will be lost.
Elaine K. Howley, Contributor
Elaine Howley began writing for U.S. News in 2017, covering breast cancer and COPD. Since … Read more
Source: Read Full Article