We at AgingInvestor.com met with some forward thinking business owners, all under age 40, expressing their concerns about their aging parents. They weren’t sure what should be set aside or what to plan for their loved ones. Any of these business owners could be your HNW clients.
Some had purchased long-term care insurance for a parent and we were happy to see that good planning. Others figured they’d have to pay out of pocket when the need arose.
The gap between what older people think and expect and what really happens as we age is startling. And it is likely to throw the burden of paying for it on the financially successful adult children of these elders in denial. Some of their parents never had much wealth. Others have depleted their assets by outliving them or by other factors.
What about the dollars and cents? The Genworth Cost of Care Survey is done every year and provides average rates charged by service providers for homemaker services, home health aides, adult day health, assisted living and nursing home care across the country. And you can also search by state to see the average where a client’s parents live. Even the lowest level of care, someone to come in and help with cooking, shopping, laundry and errands averages $19 per hour, the national median hourly rate. The national median monthly rate for assisted living is $3500. And in my state, in urban areas and well-populated centers, it is twice that.
If your clients must consider paying for long-term help for their aging loved ones, it’s planning you need to do with them. It’s a special fund or targeted assets to be used for aging parents as needed.
Educate yourself first. Figure out how much it may take. According to a colleague who knows long term care insurance benefits, the average time a person with this kind of insurance collects policy benefits is three years or less. If it’s three years at $43,200 a year for assisted living, not factoring in the 2% annual increase in cost, that’s $129,600. And that’s under the unlikely scenario that a person who lives into her 90s, say, is going to stay level in what she needs over that three years. More likely than not, her needs will increase and the facility will charge more every month for more services. We see clients who are shelling out over $10,000 a month for a parent to be in assisted living. When parent is infirm and needs a lot of things from the staff, every new thing increases the monthly cost. A few years of that kind of expense can take its toll on your client’s retirement planning.
Near the end of our fruitful discussion, one of the participants asked, “What do the other 99% in our society do when an aging parent needs long-term care?” The answer: they either provide the care themselves at a very high personal cost, or their parent spends what assets he has until they’re gone. Then he ends up on Medicaid in a shared little room in a nursing home. No one wants to see that happen if you can help it.
Here are the takeaways to share with your HNW clients who may end up supporting aging parents or paying for their care.
- Look ahead. Discuss what needs your client’s family, particularly elders may have and what may be required from your client to meet potential obligations created by their family members.
- Consider whether your client should buy long-term care insurance for parents if their parents are not wealthy and have health issues. Do this before their parents turn 60 if you can. The elders may become uninsurable or premium cost may become prohibitive later.
- Educate your client about the real costs of long-term care. If they’re under 40 as our audience was, they are probably not thinking about their potential future obligations to parents who are not financially successful. This was an unusual group.
Smart planning now can save your client shock and distress later. If they are responsible folks, help them to expect the long run as their parents age. People in the 85+ age group are the fastest growing segment of our population. Most of these elders are not wealthy and someone will need to care for them.
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