Helping Boomers plan for retirement and care for aging loved ones
by Scott Goldberg
Mr. Goldberg is the president of Bankers Life, a national life and health insurance brand that focuses on the insurance needs of Americans who are near or in retirement. Visit www.bankerslife.com
According to the U.S. Census, by 2035 older generations are likely to outnumber children for the first time in U.S. history. This projection raises the question, if needed, who will care for this aging population? Of course, many middle-income Boomers are already living this reality, as they are now the primary caretakers of aging parents and loved ones.
As more Americans turn 65 each day, retirement care for themselves as well as their loved ones, is becoming an urgent issue for which Boomers need to plan for and address. Projections from the U.S. Department of Health and Human Services show that nearly 70% of current Boomers will require some type of long-term care services during their lifetime. To help clients prepare for retirement care, advisors would do well to focus on three areas: costs, timing and expectations.
How much? Yes, that much… and potentially more
The U.S. Department of Health and Human Services estimates that the average total cost for long-term care for Boomers is $138,000. That’s a substantial sum. And remember, that’s just the average amount. Conditions such as cognitive disorders could mean a person would require care for much longer, greatly increasing the cost.
High-net-worth clients may be in a position to fund their retirement care from personal savings without any financial hardship. But even mass affluent clients can expect the cost of care to crimp their lifestyles. Most Americans will find themselves relying on family and friends for caregiving or, if they qualify, government programs such as Medicaid. Although widely misunderstood, Medicare will not cover the cost of ongoing long-term care. Meanwhile, the most efficient way to fund the cost of retirement care is through some form of long-term care insurance, which spreads the cost over a base of policyholders.
Yet, as research from the Bankers Life Center for a Secure Retirement shows, 79% of Boomers have no money set aside specifically for their long-term care needs. And, as many producers know, the number of long-term care insurance policies purchased annually has never met its expectations.
When should planning start? Early and often!
Many Boomers correctly estimate that the likely age for an adult to begin requiring any type of physical care or assistance is 70 years or older. However, that is not the age to start preparing.
Retirement care should be a thoughtful part of a client’s holistic retirement plan. It could influence where someone might choose to live, the type of home they might choose to age in, and/or the investments needed to allow them to stay in their home over time. Planning conversations need to include retirement care early on, and often revisited, as expectations and circumstances do change.
By planning early, clients can be in a position to assemble their plan while they are still healthy enough to have all of their options ahead of them, such as qualifying for an insurance plan. It’s a fact: a higher percentage of 70-year-old clients are medically denied from being issued a supplemental health insurance policy compared to 60-year-olds.
Today, a small number of carriers continue to underwrite standalone long-term care insurance. These policies generally provide home or facility care reimbursement for up to several years with daily, monthly and annual maximums. Growing in popularity are hybrid policies that combine life insurance or an annuity with some type of care payment.
What to expect as a caregiver?
Thoughtful clients will include retirement care as part of their financial plan, but how many also considered the role they might play (or pay) for a loved one that needs care?
Being responsible for the long-term care of a parent frequently creates a physical, emotional and financial strain. According to the Bankers Life Center for a Secure Retirement, nearly all Boomers who expect to be future caregivers anticipate reducing their spending, travel, or other expenses to accommodate their ability to provide care. One-third of family caregivers have already needed to tap into their nest eggs to support the care of a parent or loved one.
If there’s good news here, it’s that these clients tend to be the most open to a discussion about their own future needs because of their exposure to a long-term care event, generally through a parent. They also tend to be the ones most interested in evaluating a long-term care insurance plan for themselves or their spouses.
Make it your role as an advisor!
If a client is worried about whether they can successfully prepare for retirement while also taking care of a loved one, it not only can be done, but it must be done. Share the facts, start the dialogue and help clients balance their immediate obligations with their own needs. It’s never too late to help clients plan for and secure their financial futures. ◊