Long Term Care – A Woman’s Guide
Women face unique financial challenges as they age. When compared in aggregate with men, women live longer, earn less, and spend fewer years in the workforce.
Financial concerns are often more acute for older women who are divorced, widowed, or otherwise single, as well as for those who have spent all or a significant portion of their adult years caring for children and other family members. Consequently, planning for long-term care (LTC) is an issue of particular importance.
LTC assists people, through various support services, with activities of daily living, such as dressing, bathing, eating, transferring, and toileting. If a woman has difficulty performing two or more of these activities due to physical limitations, cognitive impairment, or both, LTC may be needed. Generally (depending on the policy), LTC services may be provided in your home, in an assisted living facility, or in a nursing home.
Most people are unaware of the actual costs associated with LTC. For example, according to the Genworth 2017 Cost of Care Survey, the average cost in Los Angeles, of a private room would be $111,325, or $9,277 a month.
There are a number of reasons why it is important for women to plan for LTC.
First, women live longer. Back in 1900, women and men shared a similar life expectancy of about 47 years. Today, the longevity of both men and women has increased overall by 30+ years, with the life expectancy for women generally five years longer than men. Unfortunately, with longer life comes an increased risk of health problems. In fact, the American Association of Retired Persons (AARP) in a recent report noted that there are more women than men living in nursing homes. Women are also more likely to sustain a disability or be diagnosed with a chronic health condition.
Second, women often lack the resources necessary to fund the care needed later in life. According to the U.S. Department of Labor (DOL), the average woman in the U.S. who is employed full-time earns less than her male counterpart (80 cents for every dollar a man earned in 2016). In addition, women typically spend nearly 12 years out of the workforce while taking care of children or elderly parents. It is not uncommon for many women to spend years juggling family, professional, and caregiving responsibilities, and as a result, their income is disrupted, hindering their ability to save money or attain financial stability.
Finally, shorter careers and lower incomes often result in lower Social Security benefits. According to the American Association of Retired Persons (AARP), the average annual Social Security income received by women 65 years and older was just $14,184 in 2015. Moreover, married women often don’t know that the benefits accrued by their husbands may be reduced if they are widowed or divorced. These factors put many women at high risk for poverty as they age, especially if they do not plan accordingly.
Many women think their children or other relatives will be there for them, should the need for LTC arise. But even if the willingness is there, the costs associated with caregiving often exceed the financial capabilities of the average family. And, if medical care is required, family members may not have the necessary skills to provide care. As you can see, the time has come for women to look toward the future and prepare for LTC.
The Insurance Alternative
The good news is there is an alternative. LTC insurance can help cover LTC expenses before you meet the strict requirements for Medicaid eligibility. Many policies cover the costs of nursing homes, assisted living/residential care facilities, adult day-care centers, and/or home care. The cost is typically based on your age, your current health, and specific policy features, such as scope of coverage, levels of care, and duration of benefits. LTC insurance is designed to help you maintain your independence and quality of life, while offering increased options for care.
Needless to say, it is difficult to prepare for the possibility that you may one day need LTC. While you don’t know what the future holds, planning today for an uncertain tomorrow may help preserve your assets, increase your options for care, and perhaps most importantly, bring you and your loved ones peace of mind.
Eddy Financial, LLC is not a licensed insurance entity. Insurance services are offered through Andrew Eddy, an individually licensed life insurance agent in the state of California. Andrew Eddy’s California Insurance License is № 0K02163.
As we work with clients, one of the biggest things we see is the lack of communication among generations about money. It’s not an easy subject to broach. Perhaps you had to pay your way through college. Or your parents didn’t help you as much as you expected. Maybe your parents thought you should have pursued a different career. Or you grew up in a household that never discussed money – it was always dealt with quietly.
Family dynamics can be difficult. It’s human nature. However, when there is at least an attempt at dialogue, you may be able to sidestep many of the hurdles that we’ve seen.
- How are your parents supporting themselves financially? Is there a pension? A 401k? IRA? Is there insurance? Is the insurance the type you have to monitor annually – or a policy that requires annual premiums? Is there long term care insurance?
- Do the parents have an advanced healthcare directive? We typically recommend clients in California go to the California Medical Association website (www.cmanet.org) and order a booklet or consult their attorney. See a sample here: Advanced Health Care Directive Kit . An advanced healthcare directive allows someone to appoint a person as the healthcare agent and indicate how you’d like to be treated medically.
- Is there a will or trust? What advisor(s) or attorney has copies of this information? If it’s kept in a safe deposit box at a bank, where is the key stored?
Clients who have had the most success with planning conversations are typically those that start the conversation early. Usually the conversation goes something like this: “As you’re now in retirement, I wanted to understand a little more about your financial/health affairs.” Typical response: “I have everything under control — don’t worry about me/us.”
These types of conversations may need to be attempted multiple times before there is an opening. But, if you start the dialogue early, and try to broach it at a reasonable time consistently, we’ve seen success.
We understand that most people aren’t focused on the details of what is invested where or keeping track of insurance or health care forms. We have seen adult children have success asking a parent to put together a summary of their accounts so that someone other than themselves will have an idea of where things are located or the contact information for their advisor(s). This doesn’t mean that you have to have a full-blown conversation about your parent’s investment philosophy, how their will or trust is divided up, or how much they currently have in assets (if they don’t feel comfortable doing so). It means that you’ll be able to get this information when necessary. If you don’t have this information it may be very difficult to track down accounts, get banks to allow you to cash checks in parent’s accounts, and handle a parent’s finances when they are unable or unwilling to do so anymore. On the health care side, the failure to plan appropriately can have a dramatic impact.
Bob being from the Baby Boom Generation and myself from Gen-X, we’ve been able to “referee” a number of family generational conversations about money and planning. Please reach out if we can be of any assistance whatsoever.