Advising Your Longest-Lived Clients

Advising Your Longest-Lived Clients

Feb 21, 2019 | aging, aging investor, cost of aging, cost of long term care, declining health, elderly, finances for elders, financial advisors, handling money for aging parents, handling money for seniors, health, long term care insurance, resources for senior, resources for seniors, retirement planning, senior citizen investor, senior investor, seniors finances

It used to be that we could think of retirement in a kind of predictable way. People lived into their 70s perhaps, and we measured retirement by that. We used tables, algorithms and other tools to tell us how much we should save and how much we could spend in retirement. And it was all based on assumptions that may no longer apply.

Life expectancy for a woman in the U.S. in 2018 was 84 years. For a man, the figure is 80 years. Those averages do not take into account the fact that well educated and financially secure people live longer than average. This is presumably based on the notion that people who know what a healthy lifestyle is and who can afford the best medical care will outlive those who do not have those advantages. In my own county, for example, which has a high proportion of elders compared to other counties in California, one wealthy city shows a life expectancy for men of 93 years.

Suppose that your aging client lives to be 93, having retired at age 65. That’s 28 years of retirement. What the algorithms don’t clarify is what you, the advisor needs to plan for with your client during the last decade of life, from 83-93.  No formula is going to help you with the individual discriminations you need to make concerning your client’s risks for care and how to assess and plan for them. They can be a substantial cost, out of pocket, not covered by Medicare, and absolutely necessary.

The way we age is determined by two main factors: hereditary tendency and lifestyle. Our genetic makeup directs only about 30% of the equation. The other 70% is driven by the way we choose to live our lives.  There are plenty of folks who think that a healthy lifestyle is just too much bother. They avoid exercise, eat whatever they feel like eating, never learn to manage stress and say they’d rather die a few years sooner than give up their habits, which their doctor advises against.

Here’s the problem with that belief. Leading an unhealthy lifestyle does not just cause you to “die sooner”. Rather, it may likely cause you to live with impairments, disabilities and a need for expensive long term care for chronic health conditions. These can go on for decades.

Take obesity, for example. Over two-thirds of Americans are overweight or obese. Obviously excess weight increases our risks for all manner of health issues, including diabetes, heart disease, high blood pressure, and strokes. When a doctor makes a diagnosis of one of these, the person doesn’t typically just die on the spot and save a lot of expense later on. No. The medical providers will keep the person going with medications, surgery in some cases, lots of diagnostic monitoring and trips to the doctors. These chronic conditions usually lead to disability late in life, particularly when more than one of them exists in the same person.

If you have aging clients, you definitely need to understand health risks in a basic way, so that you can help your clients set aside funds for the care they are likely to need in the last years of their retirement lives.  All of the chronic conditions I mentioned are manageable with an effort toward a healthy lifestyle but for those who do not wish to do the work involved, you can bet on a likely need for long term care. While you can’t predict the future, you can plan for risk. It’s what you do.

My own mother in law had high blood pressure and chronic kidney disease for decades. She worked vigorously at diet, exercise, social activities and other components of a healthy lifestyle. Heredity was not on her side. She lived to be 96. During the last 3 years of her life, she needed help. She moved to a seniors’ community where help was available and eventually, she paid for private caregivers. Her cost of living at the last part of her life was $120,000 a year. If this were your client, would he or she have at the ready $360,000 to pay for care? How about if there was no pursuit of a great lifestyle? The care expense could easily be 10 years.

The takeaway here is that advising for longevity needs to include the skill of assessing fundamental health risks that create a need for out of pocket, long term care. You don’t need to be a doctor and you can’t predict everything, but you can do what is reasonable to help your client plan. Ask the right questions. Keep track of your client’s general health picture.

To learn more about what to look for and what to ask, get Hidden Truths About Retirement & Long Term Care, available at AgingInvestor.com and on Amazon.

By Carolyn L. Rosenblatt, RN, Elder law attorney, AgingInvestor.com

This Small Step Can Prevent Financial Disaster For Your Aging Clients

This Small Step Can Prevent Financial Disaster For Your Aging Clients

Jan 27, 2017 | aging, aging investor, declining health, diminished cognition, elder investor, elderly, finances for elders, financial advisors, financial capacity, financial elder abuse, financial judgement, handling money for aging parents, handling money for seniors, long term care, long term care insurance, medicare, senior investor, seniors finances

Do you have older clients who seem to be doing really well physically? Some of our aging folks are remarkably sharp and we can all be lulled into a false sense of security with them. This is a heads up warning about a real situation that you can perhaps help clients avoid by a simple step. Bear in mind that your older clients may be alert but still have trouble keeping track of the occasional bill. That can lead to a true financial disaster. Here’s what happened to one person we met at AgingInvestor.com who could well be your client.

Ruth is 88, still quite independent, taking care of herself at home. She does her own shopping and cooking, drives and pays her own bills. Great at her age, right? But when it comes to memory, that’s a problem from time to time. And forgetfulness plus an unforeseen glitch caused a financial nightmare for her. Here is what happened.

Ruth has Medicare and supplemental insurance. That extra 20% the supplement pays doesn’t sound like a lot, unless you have a crisis and have to go to the hospital.

Ruth paid her bills by check each month. But sometimes her mail carrier made mistakes and put envelopes in the wrong box. That’s just what happened with Ruth’s supplemental insurance bill. She didn’t pay the bill one month because she never got it. That was the glitch. Unfortunately that is exactly the month that she had a major health crisis and had to be hospitalized. She never knew that her supplemental insurer had missed a premium payment from her until they denied payment to the hospital for the amount due after Medicare paid the hospital in full. She was very upset and called them but they brushed her off when she told them what happened. She had never paid late nor had she ever missed a payment. They didn’t care. Her bill for the amount Medicare didn’t cover was over $80,000. They flatly refused to pay it.

She tried to call again and again but got nowhere. She sent a letter but received no response. Ruth’s case is not the first time we’ve seen a situation when an older person fails to pay an insurance premium notice either because of illness, dementia, not receiving the bill or other valid reason. Some companies will allow reinstatement of coverage when the amount owed is paid in full. But Ruth’s former insurer has been horrible; clearly to get out of the large bill they would have had to pay. They’re probably happy about it but of course Ruth is distraught.

Now imagine that Ruth is your client. Most write checks by hand for paying bills, as they have done all their adult lives. Lots of people in their 80s don’t use a computer or are only able to do so with many limitations. They don’t use auto debit for paying bills automatically.

There is one thing you, the advisor, can do to prevent a disaster like Ruth’s. Work with your aging client and their family to get them set up so that payments for ongoing, recurring expenses are auto debited from a bank account. This applies most especially to insurance premiums. As long as you are overseeing the finances for these older clients, think about this simple preventive strategy you can urge them to use to protect their financial safety. Sometimes no one thinks of it. Sometimes the family is also lulled into a false sense of security because the elder is so independent in other ways. Bill paying is a vulnerability and you can think of measures to make it less so.

That medical bill coming to a client because of a simple error, forgetfulness, or glitch can be a source of extreme stress. Take the time now to talk with your client about the prospect of auto pay for all of their recurring bills. Even if they are unsure of how to set it up, a family member, a friend or money manager can offer to do this for them. It’s a small, basic measure but hugely helpful to prevent financial loss

What Is The Real Cost of Long Term Care For Aging Clients?

What Is The Real Cost of Long Term Care For Aging Clients?

Jan 16, 2017 | aging, finances for elders, long term care, long term care insurance, medicare

Are you doing retirement planning with your clients? Do you understand the real dollars involved in long term care? It goes way beyond out of pocket medical expenses for Medicare premiums, supplemental insurance and medicines. You need to help them free up enough to pay for it.

We are indeed living longer now due to advances in medicine and technology but what is the condition we’re in with longevity? It’s not true that we’re living healthier than the prior generation.

No one wants to talk about the reality that things like obesity, in 30-35% of Boomers are going to affect whether they need to pay for lots of things Medicare does not cover. Obesity is frequently associated with significantly greater risk for heart disease, strokes and diabetes. Boomers have the highest rates of obesity of any age group in the U.S. If you want to pick conditions that are most likely to result in the need for long term care, all of these are among them.

Retirement planning can be very tricky when it comes to considering the cost of long term care. Most people don’t want to have a conversation about what would happen if they became disabled. Most would rather change the subject quickly if the issue of possible diminished capacity is raised. “That’s NOT going to happen to me!” is the expected response. But the risk is real, and there are plenty of statistics to support an analysis of what it costs to care for a person with disabling health conditions.

According to the Genworth Cost of Care Survey, which comes out annually, 70% of people over the age of 65 will need some kind of long term support as they age. At AgingInvestor.com, we recommend that every financial professional have the latest study on hand and that you share it with your clients when you do retirement planning. Chances are they are not as healthy as their parents were. And what kind of care will they need?

Most people want to stay at home as they age. Many will use home care services to be able to stay at home. Here’s an example. My now 94 year old mother in law, Alice, had numerous hospitalizations for a couple of months, for blood pressure issues, the flu and other problems. She simply wasn’t safe living independently in her apartment as she recovered. A home care worker came in every day for a cost of $25 per hour, initially for 12 hours a day. That cost is not paid by Medicare.

She’s a good example of how we can need care with advanced age even if we do things right. She has always taken good care of herself, doesn’t smoke, doesn’t abuse alcohol, exercises regularly and keeps her weight in normal range. And yet, after illness she needed 24/7 care. The overall out of pocket costs associated with that bout of illness approached $10,000. She’s fairly tough and did recover fully. However at her age that is not what usually happens. Home care could be needed indefinitely at a cost even part-time of at least $20,000 per year.

The extra $20,000 a year any less resilient elder could need is for someone who has neither heart disease nor diabetes. Chronic illnesses put a person at even greater risk of needing expensive care. Full time around the clock help can run $250,000 per year and up, depending on geographic area market rates.

Here’s the takeaway: Expect that anyone who reaches the age of 80 is much more likely than not to need cash to pay for help of some kind. If your client is overweight or obese, the risk is very high. Ditto if your client smokes. Be sure to plan for making cash available to cover your client’s likely needs in his later years. Most of what is usually required is not covered by either Medicare nor supplemental “Medigap” insurance.

By Carolyn Rosenblatt, RN, Attorney, AgingParents.com and AgingInvestor.com

Three Tips For Talking To Your Older Clients About Long Term Care

Three Tips For Talking To Your Older Clients About Long Term Care

Sep 20, 2016 | aging, aging investor, diminished cognition, elder investor, elderly, finances for elders, financial advisors, financial capacity, handling money for aging parents, handling money for seniors, investor, log term care, long term care insurance, senior citizen investor, senior investor, seniors finances

Three Tips For Talking To Your Older Clients About Long Term Care

When you look at an older client’s portfolio, the biggest concern is probably about whether they have enough to last to the end.  You calculate the drawdown, the earnings, and you spend time on those figures.  But what about long term care?

This is the conversation the client doesn’t want to have.  No one wants to think about being disabled or losing independence.

Of course, this is not realistic.  You, the planner may not want to bring up the subject because of your own discomfort, or because you aren’t sure what to say, or perhaps because your client dismisses it if you do bring it up. But a competent planner and advisor must do so.

Consider this realistic typical scenario:

A health crisis happens to your client. It can be a fall, a stroke or heart attack, anything that is unexpected. First, there is a hospitalization.  OK, Medicare covers that, together with supplemental insurance. A rehab facility is next with therapy and nursing care.  Medicare covers that but only to a point. When the elder is ready for discharge, the client and family are told, sometimes a day or two beforehand, that they will have to get help for the aging loved one at home.  ”Doesn’t Medicare cover that?” they ask. Unfortunately, no, they are told.

The Cost 

So the family members and the client start scrambling to provide help at home. In some parts of the country the cost is about $30 per hour.  According to the Genworth 2015 Cost of Care study, the national median price for someone to provide help with bathing, dressing and walking or other hands-on home help is $20/hour.

When you do the math, you realize that even if your client needs just twenty hours a week at the average cost, it will add up to nearly $20,000 a year.  That is on top of other, non-covered medical expenses, such as physical therapy when Medicare stops paying, hearing aids, and many medications. And that is just the beginning.  Limited hours of home care often stretch into full time care as people  who have disabling conditions age.

Some people figure they can spend their assets and give things away so they can qualify for Medicaid.  I would not recommend Medicaid as the best way to get quality care.  First, one must be really destitute to qualify for it. And the state looks back at all financial transactions for a five year period in most states prior to the application to see what was going on, what transfers were made and if they were honestly done. Second, the care one receives under Medicaid is the most basic, may be of the lowest quality and typically is not what anyone really wants.

If you can prevent that choice, you will.  Your client could spend her last days in a three bed room in a dingy nursing home if she or anyone in her life thinks Medicaid is a fine way to pay for care.

The cost for quality care at home can be staggering.  In my own prosperous county, with a very high elder population, the cost of 24/7 care at home from non-nursing providers (home care workers) exceeds $200,000 per year.  That is on top of the ordinary costs of living a senior has, regardless of care. And she will still be paying her out of pocket costs for other things Medicare does not cover: many medications, other non-covered services, Medicare premiums, etc.

 Taking On The Long Term Care Discussion: Three things you should do

  1. You need to create a plan for how to pay for long term care in the future as part of your job of financial planning and retirement planning.  Your client is not likely to ask you about it. Do not wait to have these discussions. Cash for the unexpected need for care could be a major expense. Your client needs to know the facts and figures.  Most people grossly underestimate the costs. We have even seen financial industry publications naively state “Medicare pays for most things”. It doesn’t pay for what most people need to stay at home after any disabling condition arises.
  1. Educate your client about the likelihood of this need for future care.About 70% of people will need long term care in some form in their futures.  Failure to plan for it can bankrupt a person or leave them in serious debt toward the end of life. Or some investments could make cash inaccessible when needed.
  1.  Use resources to help yourself understand the real costs of home care, assisted living, and nursing home care.  In order to educate your client, you need to educate yourself first. The Genworth Cost of Care study is a good resource. Here at AgingInvestor.com, we also offer tools[1] to help you.  Be sure you have something to hand to and to discuss with your client.  The need is now for any retiree.

by Carolyn Rosenblatt, RN, Elder Law Attorney & Dr. Mikol Davis, Geriatric Psychologist

AgingInvestor.com

[1] The Family Guide to Aging Parents: Answers to Your Legal, Healthcare and Financial Questions, and Succeed With Senior Clients: A Financial Advisor’s Guide To Best Practices and Working With Aging Clients, A Guide for Legal, Business and Financial Professionals. All 3 books are available at AgingInvestor.com and Amazon.com