Long Term Care Insurance
Author Jacqueline Marcell tells the story of caring for her parents without the benefit of long term care insurance, then gives questions to ask when considering insurance.I insisted that my parents buy LTC insurance several years ago. It was ghastly expensive and we could only find one company to write my then 84-year-old step dad. They could only get two year coverage and then only limited coverage. Every year my mom threatened to not pay the premium and let it lapse. They would never need it and it was costing almost $8000 per year. I really didn’t know the right answer. It was expensive, but I also knew that they didn’t have the resources for long-term care.
I’m so glad they had it. Dad was in a nursing home for a year at over $6000 per month. Now he’s in a board and care home for half that. So in one year, we gained back more than we paid for the coverage. Even so, Mom has spent a lot of money over and above what the insurance covered. And that doesn’t count the prescription drug donut hole that I’ve previously written about. Getting old is expensive!
So my husband and I are still debating. Coverage would be less per year for us, but if we live as long as my parents, we’d pay a fortune before we ever use the coverage. Decisions, decisions…
Labels: aging parents, long term care insurance, nursing home costs
Sunday, October 22, 2006
Strategies for the "Sandwich Generation"
Karyn McCormack, in an article for BusinessWeek.com, offers several strategies for the Gen Sandwichers.She notes that the costs for the Gen Sandwichers can add up, even if your parents have saved for their own future care. The reality is, their generation is living longer—many into their 90s--thanks to better health care, and the cost for that care is rising.
McCormack notes that the average cost for a nursing home stay in 2005 was $64,000 a year—or about $176 per day—for a semi-private room. In my step dad’s case, the cost was $205 per day, plus lots of extras—and he doesn’t live in an urban area.
About the time Gen Sandwichers are coughing up an average of $21,235 for college tuition (per child), they’re also losing money as they take time away from work to care for their aging parents. “On average, 18 hours a week are devoted to care,” says Patti Brennan, president of Key Financial, a financial planning firm in West Chester, Pa.
McCormack points out that many caregivers, who tend to be women, must either leave their full-time jobs or work part time and give up important benefits. They might also turn down promotions and the higher salary that comes with them because they can't devote the necessary time for additional work responsibilities.
According to Brennan, “On average, care costs an estimated $659,000 during a person's lifetime in reduced salary, lower 401(k) contribution, and lost retirement and health benefits.”
Elder care can take a psychological and emotional toll, because not all siblings and family members will agree on how to take care of a parent, who will be the primary caregiver, and who will pay for it.
To avoid disaster, McCormak says that caregivers need to get their own finances and retirement plan in order. Especially when children are in the mix, caregivers must set priorities and have open communication with their entire family to figure out ways to share the financial, emotional, and time burdens.
Her article discusses seven tips to cope with being sandwiched:
1. Don't dip into your retirement savings.
2. Start a college savings plan for your children.
3. Make sure your parents have long-term care insurance.
4. Establish a durable power of attorney, a health-care directive, and update wills.
5. Take inventory of your parents' assets and consolidate accounts.
6. Seek help from social services and elder law attorneys.
7. Continue saving despite family obligations and control debt.
Labels: adult children, college, finances, nursing home costs, sandwich generation, women
Sunday, October 15, 2006
Are You Counting on a Windfall Inheritance?
Over recent years, there’s been a lot of talk about the Baby Boomer generation inheriting a huge windfall. According to an article in the Insurance Journal in 2004, the 76 million boomers were predicted to inherit $40.6 trillion by 2052.However, according to several studies reported by New York Life, Boomers will inherit far less than predicted. There are several reasons for this:
Our parents are living longer and spending more of their resources on long term and medical care.
The recently poor economy has savings.
Baby Boomers have more siblings, meaning there are more people to spread the remaining wealth among.
We’ve certainly been experiencing the first reason. For years, I told my mom to not worry. They had enough to live comfortably for the rest of their lives. Then my step dad went into the nursing home and suddenly we were spending $2000 to $3000 per month over and above what their long-term care insurance paid. Watching the savings drain was like a loud sucking sound. Add to that CD rates of under 2% for a couple of years and the dollars disappeared quickly. We’ve been able to stem some of that drain by moving him to an excellent board and care home, but the concerns remain. He could return to nursing home care any day. And Mom could just as suddenly need care. Now we aren’t so sure how long their savings will last.
So even as we’re managing the needs and perhaps finances of our parents, we also need to be planning for our own retirement. We need to be faithful in contributing to our retirement accounts rather than counting on Social Security that probably won’t be there. And we need to consider long-term care insurance. The New York Life article suggests several important ways we can plan ahead responsibly.
It’s important that we do that so that we don’t burden our children—a generation that has far fewer workers than the Boomer generation.
Labels: Baby Boomers, finances, inheritance, nursing home costs