Families Face Steep Long-Term Health Care Costs Even When It's Free
Many financial advisors attempt to discuss how their clients will address the growing long-term health care costs. One of the most significant financial demands people face in retirement will be long-term health care.
When you look at today's costs, they are expensive. Skilled nursing homes are the costliest, but most people receive long-term care services at home or in assisted living facilities.
Houston financial advisor Joseph Birkofer, quoted in Financial Planning says the average person is unaware of the economic impact of long-term health care.
The average person has a vague idea of long-term care expenses and a lot of hope that their assets will cover them
They never sit down and actually identify the specific financial demands of their retirement days.
Joseph Birkofer, Legacy Asset Management in Houston
Free is Not Really Free
Since so many families are unprepared for the financial impact of long-term care on their retirements, nobody is ready for the reality when it does happen.
Families either pay the freight and use their income and assets to pay for this expensive care, or their families attempt to be caregivers. While they might think 'free' care is free, the consequences on their adult children, the default caregivers, is disastrous for their careers and families.
Jesse Slome, executive director of the American Association for Long-Term Care Insurance, talks about these unforeseen consequences.
A significant number of people wait too long, and the cost gets too high
Jesse Slome
An AARP study discovered that family caregivers spend an average of $7,000 of their own money per year on caregiving. There are about 53 million unpaid family caregivers in the United States alone, and the financial impact is more than lost wages.
According to the AARP Public Policy Institute, the total value of this caregiving is worth $470 billion.
What many people ignore until it happens are the physical and emotional consequences of being a caregiver. The job is difficult, and most informal unpaid family caregivers are untrained and undoubtedly unprepared.
According to Blue Cross Blue Shield research, the estimated direct economic effect of unpaid family caregivers is approximately $44 billion, including the costs associated with more than 650,000 lost jobs and almost 800,000 caregivers missing work.
Blue Cross research said nearly 51 million Americans over age 65 require some type of caregiving. This number does not include those under age 65 who need long-term care services.
A MetLife study estimated that the amount of lost wages and reductions in Social Security and pension benefits totaled $303,880 for the typical caregiver. These numbers would be higher today than the 2015 numbers cited in the study.
Thinking that family members can easily become a caregiver for you in your older years is a fallacy.
Problems at Work
Multiple studies have shown that most family caregivers are employed and must juggle their work and caregiving responsibilities. Because of their jobs, about half of these caregivers had to adjust working hours (including reducing hours). Others had to take a leave of absence, leave their job completely, and even turn down promotions.
Workplace challenges often arise when children become primary caregivers of their parents
These challenges can include having to take time off in the middle of the day, using personal time to take the parent to doctors' appointments, and using vacation time to visit their parents in other cities or locations.
Joseph Birkofer
Early Retirement
Since family caregivers are human, you can only take so much pressure. In an AARP study, about 22% left the workforce earlier than planned so they could provide care for their loved one.
The study also revealed that about 83% of people in their prime working years (ages 51 to 54) may need to care for their own parents or their parents-in-law. For those nearing retirement (60 to 69 years), more than 45% face the risk of needing to care for a parent.
Relying on Family - Majority Surveyed Expected Families to Provide Long-Term Care
The majority of adults surveyed by AARP, ages 40 to 65, say they expected their families to provide long-term health care services. Yet other research indicated that most people don't want to burden their loved ones when they get older.
One conclusion might be that most people think that the need for long-term health care will never happen to them.
Most people don't think of long-term care.
We all think that we will live and be very healthy; the wife knows that she is going to take care of her husband. It's not something they plan on.
Susan Reinhard, senior vice president, and director of the AARP Public Policy Institute and lead author of the "Valuing the Invaluable" report
Family Caregivers Use Their Money to Support Caregiving
Family caregivers must deal with many challenges, including financial strain. AARP research found that about 68% of family caregivers had to use their own money to help provide care for a relative. These caregivers put their own financial needs on hold, including savings, retirement, or a child's education.
Long-term care is more than just a money problem; it is also an emotional issue affecting multiple generations. AARP research showed that 88% of middle-income individuals, ages 49 to 67, said family caregiving was more challenging than expected.
Many people have the notion that a family member will take care of them, but that notion becomes very uncomfortable when you are talking about personal care like bathing or helping one go to the bathroom.
That poses a physical and psychological burden.
Joseph Birkofer
Being Prepared is Vital
Experts say that being prepared for the costs and burdens of aging is a critical part of an overall retirement plan. For many families, this means adding a Long-Term Care Insurance policy to their planning.
Long-Term Care Insurance is like insurance for your 401(k) and other assets. You probably understand the financial impact the cost of long-term health care services can have, but how about the impact on your family?
When you have a policy in place, you have a solution to choose quality care options, including in-home care. Your assets will be protected. Your loved ones can concentrate on being family instead of being burdened by being your future caregiver.
Most people start their research and obtain coverage in their 50s.