Caregiving is often so easy at the start, you don’t even think of it as caregiving. It’s a few days off from work to accompany Dad for medical tests, or a couple of hundred dollars a month for someone to check in on Auntie, or a few extra flights home to help your parents move into a senior community. It seems manageable—until it isn’t. Short-term fixes can stretch into years, upending lives, taking family dysfunction to new levels, and blowing up otherwise solid retirement plans.
Caregiving poses a challenge even to professionals like Amy Goyer, AARP’s caregiving expert.Goyer’s parents were well prepared for retirement, with pensions and long-term care insurance, not to mention a daughter with access to some of the best resources around. Like many affluent seniors, they moved into a continuing-care retirement center, only to be forced to leave five years later by the soaring additional costs required for Goyer’s mother, who had suffered a stroke, and her father, who was diagnosed with Alzheimer’s.
Goyer then moved from Washington, D.C., to care for her parents at their home in Phoenix. Her mother died a few years ago, but Goyer is in her 12th year of caring for her dad. “That is one of the things that shocked me. I had no idea it would be so long,” she says. “I’ve worked in aging for more than 35 years, and caregiving is extremely difficult for me; I can’t imagine what it’s like for others. It’s impossible to predict exactly how loved ones’ needs will develop, so I’m constantly problem-solving.”
THAT UNPREDICTABILITY makes providing long-term care one of the biggest challenges of aging—and also why it gets short shrift in retirement discussions. There is no neat template for the process. About 70% of today’s 65-year-olds will need prolonged assistance. The tribe of caregivers for people older than 50 numbers 34 million, and is likely to grow: The downside of living longer is that many people spend their later years hampered by chronic conditions that require help for basic tasks. “Long-term care is a reality for all of us, and figuring out how to be ready for it should be part of every single financial and retirement plan,” says Ken Dychtwald, head of Age Wave, a consulting firm focused on aging trends.
Too often, however, there is no plan. Two-thirds of people in a recent survey by Genworth Financial expected the government to cover all or part of their long-term care. But Medicare covers only some skilled nursing services—such as short-term speech or occupational therapy, intermittent skilled nursing care at home, and hospice services—leaving many long-term care costs uncovered.
What’s more, the statistics around long-term care costs can foster a sense of complacency among diligent savers. For example: The national median cost for a private room in a nursing home was $97,500 last year, according to Genworth’s latest survey. The average stay in a nursing home is two years, amounting to just under $200,000.
While high, that wouldn’t crack the nest eggs of many affluent people. But those estimates can create a false sense of security. For starters, Genworth estimates that, assuming a conservative 3% inflation rate, a private room will cost $176,000 annually in 20 years, when today’s 65-year-olds may need care. Then there’s the myriad of out-of-pocket items, from small things like incontinence products and airfare to bigger-ticket items like private aides. Also excluded: The indirect costs borne by caregivers who give up their jobs or reduce their hours.
The biggest risk comes from chronic conditions like dementia, which people can live with 10 or more years after diagnosis, pushing the total long-term care tab to $500,000 or more. The need for home health aides or nursing care is a big part of this, and it’s only getting costlier. “We have a long-term care crisis on the horizon. Over the next 15 to 20 years, the number of potential caregivers to people needing care will be cut in half—a scary proposition for the cost of care,” says Jamie Hopkins, a professor at the American College of Financial Services’ retirement income program.
Barron’s canvassed experts, including lawyers, care managers, insurance consultants, and caregivers themselves, to map out the stages of care and craft a plan that facilitates the best financial and emotional health possible for all involved.
First Phase: I’ve Got This
What it looks like: Initially, caregiving can feel like simply lending a hand. Family tends to pitch in, providing rides to doctor’s appointments or for errands, helping out with some light housework, or even just checking in on someone more often.
Costs for this phase are difficult to estimate because spending is erratic, and few people track it. Plus, they can build gradually. “It’s the ‘shock and denial’ phase,” says Anne Tumlinson, a public policy researcher and consultant who also runs Daughterhood, a site to help caregivers navigate the elder and health-care systems. “People try to avoid making hard decisions, and that can set them up for failure later.”
What you can do: The bulk of long-term care is handled by family—so gather your family and discuss with the person who needs care how he or she wants different scenarios handled. That scenario-planning should include what happens to the surviving spouse—too often that gets neglected. For instance, if a couple moves into an assisted-living facility because one person needs more care, and if that person dies, the surviving spouse may not need to stay there. Moving out could reduce long-term care costs and may be better for one’s emotional health.
The conversation should also assess available resources—human and financial. Get recommendations from doctors and lawyers for service providers and senior communities. Find faith-based or community resources that can assist with transportation or companion care, and gauge which neighbors, family, or friends can be called on in a crisis, or pitch in on a more regular basis. The National Association of Area Agencies on Aging can direct you to local resources, such as service providers and long-term care facilities. Even if plan A and plan B is to remain at home, caregiving experts stress the need to check out facilities early. Most have waiting lists, and no one should make a housing decision under duress.
This is also the time to assess the financial options, including long-term care insurance. Once someone needs professional care, has a chronic condition such as multiple sclerosis, or has a handicap sticker on the car and a walker in the trunk, it’s almost certainly too late to purchase long-term care insurance. Policies vary widely, but long-term care insurance generally covers certified nursing assistants, assisted living, and adult day care. This can help in a myriad of ways, but it’s not a panacea. (We’ll go into more detail in the Second Phase. Also, see “A Word on Long-Term Care Insurance.”) Read more at Barrons.com