As more
Boomers are becoming caregivers themselves for their parents and loved ones,
the realities of the costs and work involved are sinking in. It's time to make
a plan for yourself.
By NEALE
GODFREY, FINANCIAL LITERACY EXPERT, President & CEO | Children's
Financial Network Inc. 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:
Long Term Care Insurance
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
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.
Life Insurance with a feature called an Accelerated Death
Benefit
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.”
Sell your life insurance policy
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.
Immediate Annuity
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 Home Health Care
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.”
Neale Godfrey is a New York
Times #1 best-selling author of 27 books, which empower families (and their
kids and grandkids) to take charge of their financial lives. Godfrey started
her journey with The Chase Manhattan Bank, joining as one of the first female
executives, and later became president of The First Women's Bank and founder of
The First Children's Bank. Neale pioneered the topic of "kids and
money," which took off after her 13 appearances on "The Oprah Winfrey
Show." www.nealegodfrey.com
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