By Werner Maiwald, CFS
Renaissance Advisory Services, LLC
As our society ages, long term care has become a topic of both conversation and frustration for many families. Aside from the financial burdens created by this often-unacknowledged situation, the social and emotional impact on loved ones providing care often strains the very core of relationships.
Let’s get to the root of some of those issues and why we, not the limited government programs, have to take control of this looming black hole in everyone’s retirement plan.
Plan! Plan! Plan!
From an early age, we plan towards education, a career, marriage and a family. We save for college, homes, and retirement. We spend on our personal wants, bills, health and medical needs.
Some of us even have wills, durable power of attorney and health care proxies to guide our next of kin in the estate settlement process. However, when it comes to eldercare planning, the conversation seems to fall off the cliff. We assume that our children will do the right thing, but how can they possibly know what we want if they have no direction.
Children and parents should be talking about all these concerns and not on the day before the crisis starts! You may not be physically or mentally able to execute your wishes. This is where your long-term care plan comes into effect.
Life does not end at retirement and eldercare will increasingly become part of that retirement plan.
The caregivers
Informal caregivers are usually family, friends or volunteers who are rarely paid for their services. Approximately 80 percent of all caregivers are a spouse, daughter, daughter-in-law or son-in-law. The issues arise when a caregiver has to quit a job, and the financial and emotional toll is felt throughout the family unit. Strain and burnout on the part of the healthy caregiver often ensue. Caregivers may themselves become ill and in turn need care.
Formal caregivers are typically paid for their services. Care may be a combination of formal and informal in the home. Once care cannot be given in the home any longer, assisted living, continuing retirement community, or a nursing home becomes the primary care facility, and the expenses of these changes start to erode an individual’s savings. As the degree of care increases, so does the financial drain on assets and eventually, total financial control is given to the facility.
Bottom line – you will always have care, but at whose expense?
Paying for services
A large majority of the American public still believes the government will provide long-term care when needed. This misconception is what prevents most people from planning for care for themselves.
Although short term coverage is available through Medicaid, this is what is also known as crisis planning and unfortunately, the lack of prior planning will have a severe impact on the individual and his or her family’s ability to control the spend down of assets.
Long-term care insurance is one of the best ways to shift the cost of care from your personal assets to the insurance company. However, there are conditions to obtaining this coverage. First, are you insurable? Second: how much are you willing to pay for it?
No one likes premiums, however are you willing to rebuild your home from a fire with your own money or for a reasonable cost, use the insurance company’s money? Remember: obtaining long-term care insurance does not absolve you from the planning process as other considerations still need to be addressed; shifting assets in a timely manner, length of care beyond the coverage time, estate issues, etc.
Using your own assets to pay for care is certainly an option. Oddly enough, this requires even more planning as other financial issues need to be considered such as decreasing retirement funds, transfer of assets restrictions and family financial planning options.
Creating a long-term care plan
Whatever the plan, let your family know. This includes your care preferences, wishes pertaining to end-of-life, preferred medical treatments, disposition of property and selecting a personal care representative. These instructions do not replace formal legal documents. Provide a list of assets, income and insurance plans, and funding strategies for long-term-care services.
Prepare a checklist that will help you monitor the progress of your plan; otherwise it will not become a reality. The final step is the most important – make your wishes known! No plan has value unless those involved in the decision making process are aware of it. That includes a qualified elder care attorney and a financial advisor who has elder care experience working with all parties to help implement the plan when the time comes.
Werner Maiwald, CFS is the Managing Director with Renaissance Advisory Services LLC, a totally independent advisory firm clearing through Investors Capital Corp and Investors Capital Advisory 6 Kimball Lane, Lynnfield, MA 01940. Maiwald specializes in portfolio modeling, risk analysis, and wealth management services. His office is located at 733 Chapin Street, Suite 202, Ludlow, MA 01056. Contact Maiwald at 413-589-1400 or via email: wmaiwald@renadvisorysvcs.com
