Reliable Source of Information
Baby Boomers Uninformed
About Long-Term Care Costs
Expert Tells Senate Panel That
Boomers Are Headed for Disaster
A survey conducted by the Washington, D.C.-based research firms Penn, Schoen & Berland, and Fabrizio, McLaughlin & Associates, found that boomers are poorly informed about the limited long-term care protection provided by Medicare and private health insurance. For example, although 27 percent of boomers think they are covered by long-term insurance, in reality, few actually carry insurance for long-term care.
The committee unveiled a "baby boomer scorecard," a checklist of 10 questions on health, retirement savings, insurance, social support systems and community resources available to the elderly that all boomers should ask themselves when planning for retirement.
Supporting the scorecard, Fernando Torres-Gil, a national expert on aging issues, said baby boomers are "woefully uninformed" about long-term care and fail to understand how vulnerable they are when it comes to long-term care costs.
"We need to provide a social safety net that ensures some measure of protection for boomers in their golden years," said Torres-Gil. "As part of ensuring security for seniors, we must also be vigilant about preserving existing, though limited, Medicare benefits for skilled nursing care. Those benefits have been cut dramatically, and the cuts are hurting seniors today."
Torres-Gil pointed to 1997 cuts tied to the Balanced Budget Act, which reduced Medicare spending for skilled nursing services by $9.5 billion over five years. In 1999, those cuts are estimated to be nearly twice as much as Congress expected.
"We're causing immediate problems by eroding the basic benefits of Medicare in the short term. And in the long term, we need to find a better solution to pay for seniors' and aging boomers' long-term care needs," said Torres-Gil.
"Boomers are completely confused about how health care - specifically long-term care - is paid for in retirement," said Tony Fabrizio, partner of Fabrizio, McLaughlin & Associates, one of two firms collaborating on the study commissioned by the American Health Care Association. "At this rate, Americans will be forced into destitution if they need long-term care at some point in their lives."
Four out of five boomers interviewed do not know how long-term care is paid for, and 25 percent say they are unwilling to consider paying for additional insurance to cover these costs. While 41 percent are willing to pay between $1 and $49 per month for long-term-care insurance, in most cases this is well below actual costs of long-term-care policies. According to the American Council of Life Insurance, long-term-care insurance policies range from approximately $30 to $440 a month per individual, depending upon the age of the policyholder and the level of coverage provided.
"These findings make us wonder if boomers are planning for yachts and sunsets at the risk of ignoring their biggest financial burden, long-term care," said Fabrizio. "Two out of three boomers believe that they should not be forced into poverty to get government assistance for long-term care, but that is exactly what Medicaid requires. It's a pay-now-or-pay-a-lot-more-later situation."
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Financial Planning
Take Stock Now
to Prepare for the Future
Financial planning involves making a realistic accounting of current property and assets, establishing economic priorities and taking steps to realize future needs, hopes and dreams. Financial planning can be difficult and emotional, but handled properly, it ultimately boosts a person's sense of security, comfort and independence.
Some people consider financial planning a family matter; others view it as highly personal, not to be discussed even with adult children. Therefore, the amount of involvement you as a caregiver have with financial planning for a senior or person with disabilities may be limited or extensive, depending upon the expectations and attitudes of both.
Financial planning considerations vary depending upon a person's phase of life. A 30-year-old saving for retirement will make different decisions from a 65-year-old seeking to manage already-accumulated assets. At any age, financial planning begins by taking stock. How much is in the savings account or the IRA fund? How much income can be expected from Social Security or a private pension plan?
The next step is making notes about financial needs and desires. These can include deliberations on planning for long-term nursing care, as well as more frivolous items like that long-delayed trip to Spain. Serious financial planning seeks to organize a person's affairs to cover necessities and realize dreams.
Some financial questions a senior might face include:
If I retire at age 65, how much will my monthly pension benefit be? How much will my Social Security income be? What if I retire earlier or later?
If widowed, what spousal benefits will I receive from Social Security? From my spouse's pension plan?
Do I have other resources, such as IRAs, savings accounts, stocks, bonds or real estate? Have I invested my resources wisely?
When do I want to start withdrawing my IRA funds?
Does my pension plan include health insurance coverage? Do I want to purchase a Medigap health insurance policy?
Do I need long-term care insurance? How do I choose the best plan and company for my needs?
If I don't purchase long-term care insurance, what are the rules about Medicaid eligibility?
A financial planner is a trained professional who helps individuals understand and evaluate their current financial strengths, challenges and options. A good financial planner should be able to provide:
A comprehensive assessment of the senior's current financial situation
An explanation of a variety of financial products, such as bonds, IRAs and stocks, including income potential, risks and other details
Information on public and private health insurance options
An assessment of expected and potential retirement benefits
Assistance in determining financial strengths and needs
Development of a written financial plan, including a timetable
Help in periodically reviewing the plan and adjusting it if necessary
Many different types of professionals offer financial planning services. Some have experience as life insurance agents, bookkeepers, bankers, accountants or tax lawyers, and their particular expertise may match the senior's areas of inquiry. Others have a broader understanding of all aspects of financial planning, which may be more helpful for individuals with complicated and extensive financial interests.
Before seeing a financial planner, gather as much information about the senior's situation as possible. Try to focus on particular goals. For example, a senior who owns a home might want to continue living there and adapt it to address medical needs; another might want to sell the home and move to a continuing care retirement community.
These tips can guide you and the senior in choosing a financial planner:
Ask about the planner's philosophy, approach to planning and the kind of final product to be produced for you.
Ask about the planner's credentials and experience.
Ask to see copies of plans prepared for previous clients, with names and confidential information removed.
Ask about fees and payment schedules.
Check with regulatory agencies to make sure professional credentials are in order. Ask for the names of some previous clients, and call them.
Interview more than one potential advisor.
Finally, create a file for copies of all paperwork the advisor gives you. To facilitate record-keeping, pay by check, not cash.
Contact these organizations if you'd like to know more:
American Institute of Certified Public Accountants
1211 Avenue of the Americas
New York, NY 10036
(212) 596-6200
www.aicpa.org
Certified Financial Planner Board of Standards
1700 Broadway/Suite 2100
Denver, CO 80209
(888) 237-6275
www.cfp-board.org
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