Retirement plans for Boomers and their parents should take costs of supportive services into account.
Baby Boomers everywhere are struggling with how to help Mom and Dad when they can no longer live safely at home by themselves, but aren't yet in need nursing home care.
The Centers for Medicare and Medicaid Services reports that at least 70 percentof people over age 65 will require some sort of long-term care support during their lifetime.Such assistance encompasses homemaker services, home health aides, adult day care, assisted living and nursing home care.
"This is right below death as people's least favorite thing to talk about. Broaching the subject is definitely an art," says Gregory Aler, partner at AlerStallings Law Firm.
Independent retirement communities typically offer a range of care options that residents can move through as their health needs change. While virtually no one expects Medicare to pick up the tab for independent living, those considering the next phase--assisted living-may be caught off-guard.
"We ask pointed questions and explain that independent and assisted living options are all private pay. Medicare does not cover them. The resident foots the bill, even for assisted living where some level of medical care is provided," Aler says.
Assisted living facilities provide varying degrees of assistance with personal care and medical needs for those who don't yet require a nursing home's constant care. Assisted living is not an alternative to a nursing home, but is itself an intermediate level of long-term care. Regulations governing these facilities are not uniform, as each state has its own licensing requirements.
Nationally the median annual cost for assisted living facilities is $41,400 for one bedroom, single occupancy, according to Genworth's 2013 Cost of Care Survey. In Ohio, it's $47,040. The cost varies based on the level of care and ancillary services that are utilized.
The time when you or a loved one needs assisted living is not the time to start figuring out how to pay for it. Financial planning discussions should include the costs along the long-term care continuum. Whether it's through asset accumulation, selling the family home or long-term care insurance, area experts offer suggestions on how to afford assisted living if and when it becomes necessary.Gathering information
Some assisted living residents arrive at the facility directly from their own home. Others shift from independent living to the assisted living units in the same community.
Westminster-Thurber Community residents have that opportunity. Late last year, Ohio Presbyterian Retirement Services broke ground on the $30 million 68-unit Goodale Landing independent living high rise. The upscale apartments are to open in fall 2015 on its Victorian Village campus, which encompasses the full spectrum of long-term care options.
"For assisted living, people come to us as early as their late 60s and early 70s. It's more typical to see them when they're in their late 70s and early 80s, though. The biggest reason they wait is that they don't want to think about it," says Ken Kemper, OPRS executive vice president, project development.
Westminster-Thurber Community has a detailed resident qualification process. "Our actuarial forecast estimates how you will age and your need for support services as you move from independent living to assisted living to nursing home care. The forecast uses averages and looks at the likelihood of what care you will need later on." Kemper says.
The applicant's cost is based on those projections. "We have an initial entrance fee for independent and assisted living and there's a monthly fee for operational costs. The prices reflect the level of assistance the resident needs and the services they use," Kemper says.
Applicants provide Westminster-Thurber Community with financial information. "We can help them line up their finances and that takes away the worry. Often they're pleasantly surprised when they take into account what they pay for separately, such as utilities, taxes and insurance. A lot of things roll into our monthly cost or are eliminated altogether," Kemper says.
"People should not be surprised that these facilities want to know your financial situation or they ask for bank verification," says Kevin Craine, partner at the law firm of Kincaid, Randall & Craine. "They're determining how long you can afford to live there. That's something everyone involved should want to know."Preparing for the expenses
Craine says his clients aren't specifically planning for or funding assisted living. "Estate plans with trusts usually are flexible enough to finance independent or assisted living," he says.
Aler says some people can just afford it. "They're well-off enough that it's not a budgetary issue," he says.
Brian Sutliff, partner at Summit Financial Strategies, says he has clients who have sold their home. "They use the sale proceeds to cover the price of admission to these facilities. The month-to-month costs are paid out of their cash flow," he says.
Some senior citizens might think a reverse mortgage could fund assisted living. However, borrowers must maintain the property and keep the property taxes and insurance current. Equity can be tapped by several methods, but, "You can't strip out the money and move. Usually if you move out of the house you've violated the reverse mortgage loan provisions," says Mark Coffey, senior financial advisor at Summit Financial Strategies.
Those who anticipate a future need for assisted living should look into long-term care insurance. It has evolved through the years and today most comprehensive policies cover a variety of home, community-based and facility care, including assisted living. Policyholders must meet qualifying guidelines to receive benefits up to the amounts delineated in the policy.
"Old policies used to give a percentage or dollar amount for home care or assisted living. Now it's more common for them to give dollar for dollar for home care and assisted living," Aler says.
LTC insurance options narrow with age. "As you approach 60, that's definitely the time to be looking seriously at this. Ask earlier if you have a history of Alzheimer's. You can live a long time with a cognitive impairment," Coffey says.
The inevitability of aging and long-term care needs can highlight vulnerabilities in a financial plan. "The averages show a person needs about two years of home health care and will spend three years in an assisted living facility," Sutliff says.
Knowing the averages, financial planning becomes a question of odds. "Do they want to save now for the chance they'll need to cover some long-term care expenses themselves? Do they want to prepare for a 10-year stint or the five-year average? Do we want to start even earlier if they want an independent living option? Once they decide, we put together a game plan," Sutliff says.
Outsourcing risk through an LTC policy also protects assets for their heirs. "Clients are motivated to buy LTC insurance because their estate isn't diminished by long-term care expenses. More is preserved for inheritances," Coffey says.
Whatever the specifics surrounding assisted living funding, aging parents and adult children need to communicate. "Sometimes the kids must be the initiator. There's no doubt this can be a tough nut to crack. But elder care needs require a plan," Aler says. "The conversation should also make the grown children think about their estate planning needs, too."
Lisa Hooker is a freelance writer.