When I speak with my clients about the importance of long-term care (LTC) planning, I like to share my personal experiences with both my father and mother.
My father was diagnosed with Alzheimer’s in 2003. We had no idea he had Alzheimer’s until he was pulled over by police while driving in the wrong direction on a highway, at night, without headlights. He didn’t know who he was or where he’d been. We later pieced together that he most likely had been living in his car, driving around aimlessly for two to three days.
This was the beginning of our family’s nine-year journey with memory loss. My father was a blue-collar factory worker; he never made a lot of money, but he didn’t believe in debt. “You were only as rich as what you owned,” he used to say. He owned his home, and had savings and retirement accounts.
Once he started falling, we had to move him into a memory care facility which cost about $96,000 per year in 2011. He was miserable there. His memory was taken from him, but he knew he wasn’t in his home. When people visited, he would furrow his brow and say he wanted to go home, even though he no longer recognized his visitors. By the time he died in 2012, the only asset left in his name was his home. In nine years, we spent over $450,000 USD for his care, not including normal day to day expenses.
Fast forward to 2021. After a couple of unfortunate events, my mother found herself needing full-time care last year. She is the opposite of my father. Where he lost his memory, my 92-year-old mother’s body is failing—not her mind. In our search for acceptable solutions, the cost ranged from $6,000 to $25,000 USD per month. We settled on live-in care averaging about $9,500 per month not including the expense of having to feed another person. My mother doesn’t have debt either, which makes staying at home the most viable option.
We had conversations about long-term care insurance, but she did not want to explore available options, assuming she had enough money. Now that she needs to pay for LTC, it infuriates her to see years of wealth accumulation disappear so quickly and not meaningfully.
According to the Administration on Aging, by the U.S. Department of Health & Human Services, a person turning 65 today has almost a 70% chance of needing some type of long-term care service and support during their remaining years. Women tend to need care longer than men. Globally, the demand for long-term care is expected to rise due to ageing populations, increasing life expectancy, and the prevalence of dementia.
As CFP professionals, we include long-term care analysis and available insurance options as part of our client’s wealth plan. Things to ask yourself (or your loved ones):
What is your family health history?
- Are you concerned about outliving your income or assets available?
- Is there a legacy you wish to pass to your heirs?
- Do you have family who can provide and/or manage your care?
- How might your family be impacted if you require LTC services?
- Are there tax & estate implications if you consider self-funding your care?
- What type of insurance options are available?
Singapore is expanding CareShield Life to help offset the costs of having caregivers at home. In the U.S., there are a variety of LTC insurances available including some that pay benefits directly to your bank account allowing you to live and receive care abroad. Some families move their loved ones to Thailand where the costs are generally lower, and the quality of care is higher than in their home country.
LTC costs generally increase faster than average inflation and have become exacerbated by Covid. A recent financial plan done by Avrio Wealth illustrated that a woman in her mid-40s who may need three years of assisted living starting in her mid-80s in the state of NY could face a future expense of 2.5MM USD1. Most clients draw down assets to pay for their retirement, so an additional LTC expense later in life could be financially devastating.
Long-term care planning is complex and needs to be reviewed as personal circumstances change. Avrio Wealth has the expertise and tools to guide you with your long-term care planning needs.
As for my mother, she is living in her home comfortably surrounded by her belongings, which we are thankful for. She will draw down her assets, complaining every month when the bill arrives, knowing this could have been avoided with planning.
- 1 MoneyGuidePro LTC Calculation
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