Retirement planning tends to focus primarily on the dreams and visions of how those after-paycheck years will be enjoyed – but it also needs to consider how to prepare for caregiving and the possible need for long-term care.
Kyla and Jack sat quietly at the dinner table. They had finished eating but neither got up to clear the table nor to start the dishes. They were still absorbing the news that Kyla’s father’s dementia was advancing and that her mother couldn’t care for him at home much longer. He would need memory care.
Their first thoughts were about what the future would look like for her father – and especially for her mother as his caregiver. But the news also opened a new line of questions they had never asked. Did Kyla’s parents have long-term care insurance? They were well prepared for retirement, but were they prepared for an extended period of costly care? Could care costs disrupt Kyla’s mother’s financial future, too?
Suddenly, the upcoming meeting with their financial advisor took on new urgency. The topics? How could they be prepared to pick up any slack if Kyla’s mother needed financial help in the future? And how could they be sure their own planning covered such unknowns so they’d never be a burden on their children?
Retirement planning was no longer just about envisioning adventures. It was about safeguarding their shared journey, no matter what lay ahead.
At WH Cornerstone, we realize you can’t know when life will throw you a curve ball. But while they can’t all be avoided, they can be made more manageable – and less devastating – if you’ve taken the time earlier on to prepare for the consequences. We call it Curve Ball™ Life Planning.
Being prepared doesn’t mean something bad is going to happen. It simply means you and your partner will have minimized the impact on one another if it does. And if it doesn’t? You will have had all those years of peace of mind in the meantime.
Why Preparing for Caregiving and Long-Term Care is Such a Top Priority
Long-term care will be needed for loved ones with health, cognitive or mobility limitations that make it hard for them to live independently. Let’s put long-term care into context. Seventy percent of people turning 65 will develop severe long-term care needs in their lifetime, typically starting between ages 75 and 85. Forty-eight percent will need paid long-term care, while the rest will be cared for by family and friends. How long will paid care last? Twenty-four percent will need paid care for more than two years, and fifteen percent will spend more than two years in a nursing home.
Considering there are two people in a couple, the need to be prepared becomes even more vital.
And what could the financial implication be? Genworth conducts a Cost of Care Survey, one of the most quoted references. On average, in 2021, a year in a nursing home cost more than $108,000 for a private room and $95,000 for a semi-private room. Assisted living came in at about $55,000, and adult day care at over $20,000. In-home paid care ran about $60,000 for a homemaker and $62,000 for a health aide, based on a 44-hour week.
Costs varied considerably by location. For example, while a month of assisted living was $3,000 in Missouri, it was $7,000 in Washington, D.C. More relevant to us, the cost of care in the Northeast is exceptionally high compared with other regions, so it’s essential to research the costs near you. (You’ll find greater detail in our published article “It’ll never happen to me – not: a look at long-term care options.”).
Costs are expected to rise as more and more Baby Boomers move beyond age 65. But while 65 is the age at which Medicare kicks in for people, they’ll discover that Medicare covers medical costs but does not cover long-term care.
Five ‘Must-Have’ Conversations about Caregiving and Long-Term Care
In the absence of other resources – either personal savings or some form of long-term care insurance – the alternative is to undertake the complex process of “spending down” one’s assets to meet the requirements of Medicaid. The sad consequence is that it will undo all the efforts of a well-planned retirement.
You will want caregiving to be part of your retirement planning. As you consider the possible need for care, specific discussions will help you to prepare thoroughly on your own – or make the very most of any help you get from your professional support team. Here are the topics:
Health and wellness planning should be your Number One priority. Explore healthy lifestyle choices to reduce the risk of needing long-term care. Schedule regular health check-ups and screenings to detect and address any health concerns immediately and hopefully prevent the need for extensive care altogether. Integrate activities that support cognitive function and mental health to avoid – or at least delay – cognitive decline.
Long-term care insurance conversations start with the various types of insurance available, such as traditional policies, hybrid policies blending long-term care with life insurance, and short-term care insurance.
The costs associated with long-term care insurance include monthly premiums, deductibles and potential increases over time. When you choose the amount of coverage needed and how long the benefits will last, remember to factor in inflation protection so your coverage keeps up with rising costs. Consider how long a waiting (or “elimination”) period you want; longer periods lower your premiums, but you’ll need to pay all interim out-of-pocket costs. Be sure you understand the types of care and services that are covered – and not covered – by reviewing exclusions, restrictions and limitations carefully. Read the fine print!
Financial considerations include revisiting your current financial situation – your income, assets and liabilities. Most important is knowing how any long-term care costs might impact your financial stability now and in the future. Use the Genworth tool to estimate the cost of services such as in-home care, assisted living and nursing home care near you. Consider how assets – such as savings, investments and home equity – might be used strategically to cover long-term care costs while the healthy spouse’s financial stability is preserved.
Invest some time to understand the eligibility requirements and application process to access Medicaid assistance, should that become the only viable solution. Because it is designed to finance health care for people with low incomes and limited assets, qualifying will entail spending down your assets within strict rules that vary by state.
Designating caregivers entails discussing who would be willing and able to take on that role should the need arise. Keeping in mind that the need could escalate over time, who can you count on among family and friends? Think about the emotional, physical and logistical aspects of caregiving. How could it impact the healthy spouse, family and friends? How much of a support network can be built to help – and even stand in for – the healthy spouse?
And how do you decide when informal caregiving is a challenge or no longer feasible? Remember that a caregiver’s role does not end when a spouse gets paid care at home or moves to assisted living or a nursing home. Caregiving just looks different.
Legal and estate planning covers various areas. You will want advance health care directives for both partners, including a durable power of attorney for healthcare and living will. These documents outline individual preferences for medical care should they become incapacitated. You’ll also want to review or establish wills and trusts outlining how assets will be managed and distributed when one partner or another passes away. Don’t overlook the possible need for guardianship or conservatorship should one partner become incapacitated and can’t make decisions about their care or finances.
Getting Help to Prepare for Caregiving or Long-Term Care
Open, honest and empathetic conversations between two people are fundamental when discussing these challenging topics. Sharing concerns, preferences and expectations for the future is the best first step – and can take you much further than most couples ever go. It’s far easier to avoid the conversations altogether – although that puts your partner and your financial future at risk.
At WH Cornerstone, we recognize that each couple’s situation is unique – your needs, preferences and financial circumstances. Our focus on Curve Ball™ Life Planning means we are especially prepared to help you build your foundational stability now so your future can be smoother if one of you can no longer care for yourselves. We know how to take the output of your valuable conversations and put them into action.
One of the greatest gifts you can give your loved one is to prepare for the unthinkable before it happens. To help you get started, download our Curve Ball™ Life Planning Workbook “Prepare.” For help with the more complicated questions around caregiving planning, schedule a call with us to ensure dignified and compassionate care where needed – while preserving wealth for your partner, your children and your grandchildren. We’re here to help!