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The Important Question For Your Clients Contemplating Retirement

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Clients Contemplating Retirement

Longevity is increasing, as millions of Americans are living to 90 years and above, the U.S. Census Bureau reports. Will any of these long-lived folks be the parents of your current clients?

Some clients reaching retirement age themselves will be dealing with the challenges of their aging family members, even as they plan their own retirement years.

One critical question perhaps not built into your calculations for retirement income needs should be whether your clients can reasonably expect to have to support their aging parents. As reported by NPR citing the Census Bureau report, nearly 20 percent of 90- to 94-year-olds live in nursing homes. Among those 95-99, about 31 percent are in nursing homes. And in the 100+ population, 38.2 percent live in nursing homes. Who pays for that care?

Most financial advisors have a basic understanding that Medicare benefits are very limited when it comes to nursing home care. Post hospitalization, the maximum benefit is 100 days and most people do not receive even that, due to qualification requirements. For those who have to live in nursing homes long term, rather than for shorter stays involving rehabilitation such as physical therapy, the costs are paid out of pocket. The exception is for the lowest income elders. For them, Medicaid pays the cost of long term nursing home care. For everyone else, a long stay in a nursing home can wipe out an older person’s assets. The financial burden then falls on family who may have the means to prevent the impoverishment of their loved one.

Some adult children will not allow Mom or Dad to live in a nursing home long term. Maybe it was a promise they made to the aging parent. Essentially, it is no one’s first choice of where to go when care is needed. If a family has some assets but does not want to wipe out their own retirement income by paying for nursing home care or even full-time home care, the most cost effective solution is to take in the aging parent.

There is a cost involved in this choice as well, and it extends to many factors beyond money. Every family relationship in the household is impacted. Some adult children are not patient, not willing and not good at caring for an impaired aging parent in declining health. For others it is seen as an honor and a final chance to give back to the parent in gratitude for what the parent did for them over a long lifetime. Individuals vary in their perspectives, ability and willingness to take in an aging loved one.

Some families take in an aging parent and pay for part-time help, providing a significant part of the caregiving themselves. Others pay for assisted living for an aging parent, but that is not suitable for those who need care around the clock. Others allow a parent to spend down their assets until they can qualify for state paid nursing home care. The parent is then placed there somewhat as a last resort.

No matter what choice a client will make about an aging parent, it is important that the financial professional in their lives helps them see the big picture and plan according to anticipated needs for both the client and the elders for whom they feel responsible.

The Takeaways

  1. Longevity is creating an issue for families who are facing years of decline in aging parents who may not have the means to pay for care on their own.
  2. Responsible financial advisors must raise the question with every retiring client: is there someone in your life that you will likely have to support financially during your retirement?
  3. Advisors and families alike must consider and plan for how any essential financial support should be handled by adult children of aging parents. Take in the parent? Supplement the parent’s income by paying for home care or assisted living?
  4. When the means are not available to offer financial support, and the physical needs for care are extensive, it sometimes becomes necessary to allow the aging parent to become impoverished and to qualify for Medicaid. Medicaid does pay for long term nursing home care.
  5. For those with sufficient investment income expected, financial support for aging parents can be part of an overall retirement planning strategy. It is up to the financial professional to help with this process.
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