Planning For Long-Term Care: A nest egg is the foundation for your needs
At 94, Viola Lehr lives in a manner many older people only dream of. She has remained in her longtime two-bedroom condominium on the top floor of a chic four-story complex with a park view and a pool in Southern California. Lehr, a widow, has a housekeeper and a personal trainer, who has been helping her since a stroke weakened her legs.
“I spend too much money and my kids watch me like I’m mad,” she says, laughing. The nest egg that pays for this lifestyle is all hers, says Lehr, a former real estate and retail-store entrepreneur who, despite three “bummer” marriages, built her own wealth. Lehr says she and her doctor have a hospice agency lined up to care for her at home when her end is imminent. To complete the arrangements, she has set a metal box, containing her final wishes, on her dining room table. A large note taped to the box states: “When I pass away, do not notify anyone until this is read.”
Lehr has left little to chance, a practice others might do well to emulate.
The prescription for a healthy retirement lifestyle at home or in a retirement facility is good planning. People need to start looking ahead long before they qualify for Medicare. It is never too early to begin making plans for retirement, says attorney William Sauls, whose practice emphasizes estate planning. That means people should work hard to build wealth, then do some careful estate planning to maximize and protect their assets. With proper planning, retirees can use what they need and pass the remainder on to heirs or a favorite charity.
Like Lehr, people need to evaluate options well before their health is likely to slip, Sauls says. Where do you want to live? What if you need more care? How will you pay to maintain this lifestyle? People should not wait for a crisis before they—or someone else—has to make a snap decision. The trouble is, most younger people are reluctant to look toward a time when they are not so robust. And, “many don’t appreciate the expense involved in long-term care—currently, about $50,000 a year,” Sauls says.
Estate planning includes a durable power of attorney and a health-care directory, which allow a person to choose someone to make financial and health-care decisions if he or she cannot. Later, if the person should suffer from dementia, these documents help him or her avoid the costs and delays of conservatorship, in which a stranger, relative or court makes decisions.
Things to know
After 65, Medicare will help pay for some health-care needs. A supplemental policy or a Medicare HMO will be needed to round out care. Do not count on Medicare and health insurance to pay for an assisted-living facility. Neither covers long-term care. Also, for low-income people, Supplemental Security Income is an option. It supplements the cost of living at home, in a hotel or in an assisted-living facility. Not all retirement facilities accept SSI as payment in full. That means the family might have to ante up the difference between the stipend and the actual cost of the facility.
For those determined to live out their lives at home, a reverse mortgage is an option. These loans permit senior homeowners to convert the equity in their homes to cash, with the lender making monthly payments to the home owner. Repayment is deferred, usually until death or sale of the house.
The long term
Long-term care insurance is an option for footing the bill in a retirement facility or even for care at home. Signing up early might be the best bet for someone who prefers this option. And some people may not qualify later on. “Monthly cost of a policy is substantially less when you’re young and healthy,” Sauls says. “The more senior you are and more complicated your medical situation, the more expensive the policy.”