Most advisors who even ask this question of their retirement-aged clients never spend time on it. About 90% of those asked say they want to remain in their own homes as long as possible. That sounds fine. Until one faces physical decline, cognitive impairment or both. The advisor providing competent guidance about financing aging at home had better know the facts.
None of us like to think about losing physical ability or needing help. We abhor the thought of losing our total independence. In our view at AgingInvestor.com, the only advice clients are getting is about the long term picture is whether or not to purchase long term care insurance. Since most people don’t do that, the actual costs of living at home can boggle the mind. It’s the best advisor’s obligation to educate your client about the risks of the plan to age in place, just as it is your obligation to educate them about balancing their portfolios. You are giving the client added value if you take the time to talk them through the risks and dollars they may need to have available.
Here are some briefly stated facts from a real case in which an 89 year old wanted to age in place and his wife promised he would never have to leave home.
At the outset of his declining health, he had about $3M in invested assets. His portfolio was healthy and balanced for his age, according to conventional wisdom. He began to lose his ability to walk due to multiple medical problems. His wife hired home helpers, three days a week at first. As his conditions progressed he needed more and more help. He had to have a wheelchair, and a special van. A stair chair was installed in their two-story home. By the time he reached age 95, he was spending over $150,000 a year on care and assistance around the clock. In the space of time during which he was steadily losing independence until he passed away at 95, his assets were depleted to the tune of $2M. He lived in a higher end market for the needed help but the reality is that in any market, the kind of care he needed would be very expensive.
For him, aging in place was more costly than a skilled nursing facility would have been. Home modifications, private caregivers, (none of whom were licensed nurses), equipment, medications, adaptive devices, etc. drained his resources by 2/3. And not everyone has as much invested as he had to even start the journey. His wife had her own assets and she paid the cost of household maintenance, taxes, food, and utilities with her funds. Had she relied on him for those things too, there would likely have been little left at the end of his life.
It is not all doom and gloom however. Many clients live rather well in their last years without all the care this gentleman needed. Some get by with family caregiving help, and some have fewer medical conditions. But if you are going to competently help your clients plan for longevity, it’s essential to understand the real out of pocket costs of aging in place or anywhere else outside the home. If you want to add value to your services to older clients, know what they need to know to properly anticipate what can happen with living into one’s 90s and beyond. Learn all the actual costs of care for every aging client option in our book, Hidden Truths About Retirement & Long Term Care. Be well prepared to walk your client through the scenarios they could face in their futures. You distinguish yourself from other advisors when you sharpen your knowledge in planning for longevity.
By Carolyn Rosenblatt, RN, Attorney, AgingInvestor.com
