The most important conversations to have with a loved one are often the most difficult, but that does not diminish the need to have them.
As you spend time with your family during this holiday season, you have the opportunity to discuss the topic of planning for your parents’ long-term care (LTC) needs.
For instance, how is this care going to be funded? Who is going to be given decision-making responsibilities in the case of illness? And perhaps most importantly, how does your loved one foresee this care being managed and by whom?
The answers, or lack thereof, may come as a surprise to adult children – but can have life-changing implications.
For example, statistics tell us that no matter how many children you have, one child will generally provide the majority of care – usually a daughter or daughter-in-law.
In addition, the mental and physical toll on an adult family caregiver has been well documented. These caregivers work an average of 20 hours per week and face a relatively high probability of becoming clinically depressed.
Given these harsh realities, it is in a family’s best interest to have this discussion sooner rather than later – when there’s still time to address the fact that you may be the default source of care.
Before you approach your LTC talk, there are several important things to consider:
Avoid approaching this discussion at the dinner table or in a crowded setting. LTC deserves a private discussion given that it’s likely to yield strong emotions.
The idea of being unable to care of oneself can be a very scary thought for many people, far more concerning than mortality.
If steps have not been taken to plan for this probable expense, there is a likelihood that your loved one may get defensive and feel attacked.
The Cold, Hard Facts
Be armed with information. LTC is a nuanced topic, so be prepared to provide statistics that can help stress the importance of planning (as well as put costs into perspective).
- There is between a 50 to 70% chance that a 65-year-old will need LTC in his or her lifetime.
- If a person has resided in a nursing home for one year, the average male will spend an additional 1.5 years and the average female will spend an additional 3.1 years being cared for in a facility.
- The cost of care can vary dramatically depending on location, so it is safe to assume that the median cost of a semi-private room in a nursing home can cost between $84,000 and $130,000 per year depending on the state.
The Payment Options
What economic resources can be used to fund care?
- Determine what assets are available to fund care and which should be spent first (e.g., does your loved one want to keep the family home in the family?).
- Under limited conditions, Medicare will fully cover a maximum of 20 days of care in a “skilled nursing” facility following a hospital stay.
- Medicaid will not provide coverage until assets are exhausted to very low levels.
LTC and Your Retirement Plan
The high probability, duration and cost of LTC mean that a retirement plan is not complete until you have accounted for this likelihood – one that could imperil an otherwise strong retirement.
Fortunately, there are a number of options to plan for this cost:
- A traditional LTC insurance policy
- Hybrid programs that combine life insurance with long-term care
- The Federal long-term care insurance plan 3.0
- Self-insuring against this cost with a combination of pensions and assets
While there is no one-size-fits-all approach, we generally find that the best plans are a combination of self-insurance and a right-sized level of insurance. And although plans vary, the need to have a plan is a constant.
So take the time this holiday season to give your loved ones, and yourself, a very important gift – the peace of mind that comes with a plan for their care.
Greg Klingler, CFP, ChFEBC, is Director of Wealth Management for the Government Employees’ Benefit Association (GEBA). Greg has worked exclusively with State and Federal employees since 2003 and specializes in retirement planning using pensions, survivor pensions, employer sponsored insurance, and retirement plans as well as portfolio analysis, estate planning and college planning.