People are living longer than ever before, with today’s 65-year-olds having a 50 percent chance of reaching age 85 or beyond. Four million Baby Boomers turned 65 this year, and the wave will continue at that rate until 2030. The longevity revolution is here, but are we ready for it?
Holistic Plan Must Cover All Bases
Longer lifespans involve risks as well as benefits, and your financial security plan must address both. You not only need to cover the costs of 20-to-30 years in retirement, but also be prepared for what most of us would rather not think about.
That's where Americans need a wake-up call, believes broadcast journalist and Alzheimer's advocate Meryl Comer. And she is on a mission to provide it.
"Longevity is the biggest issue for our generation – we are not ready for it," says Comer, who currently serves as president of the Geoffrey Beene Foundation Alzheimer's Initiative. She was unprepared when her husband was diagnosed with early-onset Alzheimer's disease at age 57 and left her career to care for him. The couple continues to feel the impact -- 17 years later they pay more than $140,000 annually for round-the-clock home nursing care.
"According to AARP, two-thirds of people 65 and older will eventually need long-term care, and one in eight of those will be diagnosed with Alzheimer's," Comer relates. "You need to ask yourself, 'Can I remain financially stable if a loved one or I develop a debilitating illness?' and if the answer is no, look into your options."
A study released by Northwestern Mutual found that most Americans have not addressed long-term care in their planning, despite understanding that it will be needed. Though 77 percent of the 2,194 respondents agreed there is a greater need for a long-term care plan as people live longer, only 20 percent had addressed it in their retirement plans.
Having a solution for possible long-term care needs is especially critical for women, who account for 75 percent of caregivers, are more often charged with caring for elderly parents or spouses, and typically outlive men.
Here are some of the key issues that Comer raises to help people understand and be prepared for longevity and its risks:
- Costs Are Significant and Rising-According to the National Clearinghouse for Long-Term Care Information, in 2010 you would have paid more than $19,000 on average for a home health aide's assistance three times a week. The Northwestern Mutual Long-term Care Cost Calculator provides average annual costs by state for home health care as well as assisted living and nursing facilities. Keep in mind that necessary expenses for supplies, food, medications and other daily living items are not included in these costs.
- Medicare Doesn't Pay for Long-Term Care-Similar to conventional health insurance, Medicare generally covers short-term, acute medical conditions and limited related rehabilitation, not chronic care at home or in an inpatient facility. Medicaid may cover long-term care but individuals must have very limited assets and meet strict financial requirements.
- Caregiving Can Impact Careers and Incomes-Many people must juggle caregiving with their regular work responsibilities. When the demands are too great they may leave their jobs, like Comer did, losing income and retirement savings opportunities as they incur additional costs for care.
- There Is an Emotional and Physical Toll-The 25 percent of Northwestern Mutual study respondents who had provided care to others said the biggest caregiving challenges they experienced were increased stress, physical demands and draining nature of the work.
- Caregivers Need to Protect Their Own Health and Assets-Caregivers should continue accumulating assets for their own future retirement needs and not prematurely deplete them for others' care. They also should obtain the support they need from community resources, respite care and other caregiver support services, such as those available from local government and health organizations such as the Alzheimer's Association.
- Early Planning is Best-Starting early to protect your insurability and save for future needs is the best way to keep all your options open related to long-term care. A financial representative will help you create a holistic plan that addresses long-term care and other risks to your financial security and identify the best approach for your unique situation.
"Now is the time to ensure that your plans for your golden years remain just that ... golden," Comer says.