The bleak economy, which has brought surging foreclosures, sinking property values, vanishing home equity and mounting job losses, is having a major trickledown effect on seniors and families providing caregiving for an aging loved one. Financial trends for seniors are emerging, such as the housing crisis. Homeowners 50 and older have been significantly affected by the mortgage crisis, according to a 2008 analysis by the AARP. More than 684,000 homeowners 50 and over were delinquent, were in foreclosure, or lost their homes during the six months ended December 2007. Statistics like this make a statement that financial planning and preparation for aging is more important than ever.
Planning for aging and caregiving is stressful in its own right, adding financial stress to the mix can be overwhelming. So where do families begin the process for creating a solid financial plan for aging? Use the following tips to help begin the process for your aging loved one:
Tip 1: Project the cost and quality of life considerations for long term care – This is very personal and individual due to personal differences in values, priorities, historical experiences with congregate living, etc. The most important thing to do here is talk about wishes of your loved one. Find out early so planning can take place. Consider specifics that will impact finances such as:
- What kinds of autonomy/connections with people/social engagements does your loved one want?
- Do they want to leave money to charities, family, a surviving spouse?
- Do they want to stay at home, feel safe and assured of care?
- Is it important to stay where friends live?
Santa Barbara based financial advisor Charles Bloom recommends long term care insurance, “A consequence of living longer is that 50% of individuals over age 65 will require assisted living services. The costs are close to $5,000 per person per month and the average number years these services are required is 4. The beauty of long-term care insurance is, for a 50-year old, the cost is less than $3,000 per year to guarantee 10 years of long-term care coverage and the cost goes down about 50% for the second person if a couple purchases care for both individuals. Bottom line, it is extremely cost effective, particularly when considering that there’s almost a 100% chance that a husband or wife will require this care.
Tip 2: Project costs for staying in your own home - Families should work with a care manager who knows all the community resources and costs, quality, track record as well as pros and cons as they apply to different values, preferences and financial resources. The takeaway here is that care is usually a continuum, meaning there needs to be a plan for different stages with contingencies for alternatives if conditions or resources change.
Tip 3: Make sure assets are well managed and protected should your loved one ever lose the ability to oversee - This is really about how to find the right financial agent to act if your loved one becomes incapacitated. When deciding on an agent, you need to consider how well agents know you and your preferences, and are willing to follow and advocate for your wishes. Make sure to consider pros and cons of using your loved one’s children, how to prepare the family if one child is chosen but not others. Many times it is wise to consider professional fiduciaries.
”Seniors are not typically getting started early enough when planning for asset protection. In today’s rocky economy, they have investments and, like even the best professionals, are afraid, concerned and uncertain. They are afraid to sell low, afraid to make changes, afraid to change advisors, don’t know who to trust, unwilling to take losses and don’t know what to do. My advice is to pretend they were starting today. Would they purchase the stocks or bonds they currently own based on what they know today or would they choose other stocks, other bonds, have more guaranteed investments? If they can stay in the “now” rather than hoping things go back the way they were, then they are better able to make the necessary portfolio adjustments consistent with their goals,” adds Bloom.
Tip 4 – Understand insurance and available public benefits – This is another area where a care manager and financial professional are recommended assets. This area of discussion covers insurance, benefits and reverse mortgages. Make sure decision makers understand the person’s total circumstances, including their projected condition and ability to live independently, the regulations and the various products.
Bloom adds, “When considering public vs. private resources, it depends on what people feel they will need to live on, social security is generally not enough. On the one hand, seniors are not buying formal clothes for work nor incurring business expenses, they are often in the enviable position of having their homes paid for and children who are self sufficient. On the other hand, retired individuals are living longer, healthier and more active lives and that requires money. Due to the power of compounding, the earlier individuals begin putting money away to supplement their social security, the more they’ll have to enjoy and pass on after their death.”
By Suzanne McNeely, MSW, NCG, CLPF, CMC
About the Author: Suzanne McNeely, MSW, NCG, CLPF, CMC, is president and founder of Senior Planning Services (SPS) in Santa Barbara, CA. She began SPS in 1989 after many years of working in social services and hospital administration. Suzanne designed SPS to help advocate and provide guidance in all aspects of daily life for the elderly, including psychological, physical, financial and legal issues. She can be reached at smcneely@seniorplanningservices.com.
