Kiplinger's Personal
Finance Magazine October 8, 2019
Baby
boomers are living longer than ever before. In fact, as a nation, we are
getting grayer and grayer. The U. S. Census states
that, "Already, the middle-aged outnumber children, but the country will
reach a new milestone in 2035.
That
year, (they project) that older adults will edge out children in population
size: People age 65 and over are expected to number 78.0 million, while
children under age 18 will number 76.7 million."
Many
baby boomers have remained ignorant of the challenges of living longer and of
the need to make the necessary preparations for this phenomenon. Have baby
boomers saved enough to take care of themselves as they age?
The
simple answer is: no. In fact, it's NO.
Blinded
by the Light
Living
longer; working longer; loving longer. This is great. But this is all going to
cost money. Who is going to pick up that tab? Are you just kicking the can down
the road for your children to struggle with these costs and your care?
The Insured Retirement Institute in
a 2018 study found that "42% of baby boomers have nothing saved for
retirement. Among boomers who do have retirement savings, 38% have less than
$100,000 saved for retirement. Further, (only) 38% have calculated the amount
they will need to retire."
A
Glimmer of Hope for the 'Silver Tsunami'
The Bankers Life Center for a Secure Retirement released
research titled A Growing Urgency: Retirement Care Realities for
Middle-Income Boomers. It found that Boomers' awareness for their
aging and the associated costs is beginning to take hold. Scott Goldberg, president
of Bankers Life, told me that, "While some people hope to live to age 100
or even longer, the cost of caregiving associated with living longer can still
come as a surprise. However, it should be a non-negotiable in any retirement
plan. As more Boomers are becoming caregivers for their parents and loved ones
as they age, they are beginning to face the realities of caregiving first-hand,
including the financial sacrifices that many caregivers must make to provide
necessary care. The study shows that among the top five sacrifices Boomers are
willing to make to provide care, the top two are reducing other spending (66%)
and traveling less (41%).
"While
experiencing caregiving from the perspective of a caregiver, Boomers now see
the financial and emotional burden that caregiving can put on families and
loved ones, especially when caregiving hasn't been planned for. In turn,
Boomers are reconsidering and prioritizing caregiving in their own retirement
plans to help alleviate the burden that they may place on others. Long-term
care insurance or allotting savings specifically for future caregiving expenses
can help families better prepare for the inevitable need for caregiving in
their later years."
Who
Picks Up the Tab?
Boomers
are now picking up the tab for caring for their loved ones. According to
the National Academy of Social
Insurance, "Today, billions of dollars' worth of care is
provided without charge by families whose members give up time and money to
willingly help their loved ones. But many of the baby boomers won't have these
kinds of helpers, and may ultimately demand their fellow taxpayers to foot the
bill for hiring caregivers. Millions of boomers won't have spouses or children
to rely on when they become infirm and struggle to stay out of nursing
homes."
You
can't count on the government to pick up the bill. Medicare will pay for the
cost of medical services offered in long-term care facilities, but they DO NOT
pay for the cost of "any type of long-term care, whether in nursing homes,
assisted living facilities or people's own homes," according to AARP.
One
Size Doesn't Fit All
There
is no one solution to aging with dignity and care. An AARP survey found
that "75% of boomers have not factored health care costs into their
retirement savings goals, and 85% haven't included long-term care costs. Even
for the 29% of boomers who consult with a financial adviser, only 52% have
included health care and 36% have included long-term care in their
planning."
It's
time to start planning and include your adult children in that conversation.
Some options to consider include:
This is
insurance that will help you to cover many services that are not covered by
regular health insurance. According to NerdWallet,
"Most policies will reimburse you for care given in a variety of places,
such as:
·
Your home.
·
A nursing home.
·
An assisted living facility.
·
An adult day care center."
You
really need to buy this as you get into your 50s-or 60s, or you may not be able
to qualify, or the cost could be prohibitive.
Short-term care insurance is
usually a policy that covers the same costs as associated with long-term care,
but will be for a shorter duration, for instance three months to a year.
Most
whole life insurance policies will give you an option of an accelerated death benefit,
where you can "take a portion of the life insurance payout while you're
still alive to pay for medical expenses, including long-term care. The death
benefit is reduced by the amount used for long-term care."
You may
have a cash value built up in your existing policy and it may make sense to surrender
it and get the cash value (it will be less than the death benefit) and use that
money to help to pay for long-term care. Obviously, when you do die, your loved
ones will no longer receive any death benefits.
This is
an annuity that you buy, and it carries a return as the financial institution
will also pay you your principal back. Think of an an immediate annuity as sort
of working like a pension. You will need a large amount to invest (usually
$50,000 or more). If you are in poor health, you will probably get a higher
annual payout than if you are healthy. This is because the insurance company,
if you are healthy, will have to pay out over your remaining life (which could
be a long time), or they can pay for a set period of time.
Medicare
will basically pay for short-term care, for instance after a fall or a surgery.
You have to qualify for the services to be provided. They do not pay for
custodial care for instance, if you are diagnosed with Alzheimer's or cancer,
etc.
Don't
Try This at Home
Don't
try to navigate the financial waters by yourself. There are professional
financial advisers out there who will help you to sift through all of the
options. You really need to analyze your current financial situation; your
savings; your current lifestyle; and most important, your desires. What do want
your later years to look like? Do you want to be at home? Are you fine with a
nursing home?
When
you get a handle on all of that, it's time for your investment planning. That
may involve cutting back now to assure you and your loved ones will have an
inspired way forward that excites you all and that won't make you jolt up in
the middle of the night in a cold sweat.
I love the words of Betty
Friedan, who was a supporter of the First Women's Bank, while I was president;
"Aging is not lost youth but a new stage of opportunity and
strength."
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This
article was written by and presents the views of our contributing adviser, not
the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
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