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Insurance
Baby Boomers:
Prepare for Living Longer
and the Possibility of Needing a Long Term Care Plan
By Armand S. Diarbekirian
MetroWest Financial Partners, LLC
The baby boomer generation is getting older, and with life spans increasing they will be spending more years in retirement than any other previous generation. The first wave of baby boomers, born in the mid 1940’s is only seven years away from the traditional retirement age of 65.
The good news is that the baby boomers will have more time to enjoy what life has to offer. The bad news is that with skyrocketing healthcare costs they may run out of money should they develop a chronic condition that requires long term care.
Fact: “This year, about seven million men and women over the age of 65 will need long term care.” (Health Insurance Association of America, “Guide to Long Term Care Insurance,” 2002)
Long term care is not a subject most of us want to think about. Recent surveys have shown that 48 percent of the population nearing retirement, say that their greatest concern about retiring is that they will outliving their nest egg. Another 43 percent are worried about how they will pay for long term care if it becomes necessary. Unless the baby boomers are prepared, escalating long term health care costs could potentially erode their retirement assets and the inheritance they plan to pass along to our heirs.
One of the major reasons the baby boomers may be more aware of the high costs of care is that more of them are taking care of their elderly parents. According to a recent article in the Christian Science Monitor, in 1940, only 13 percent of people over age 60 had a living parent. By 2000, that number increased to 44 percent. And this percentage will increase at a higher rate of acceleration in an expanding population segment that is 85 years of age and older.
The reality is that long term care is not just for the patient needing the care; it also serves the family that is caring for the patient. As caregivers, families are faced with the emotional, physical, and financial aspects of long term care. Nearly everyone who needs care wants to remain in their own home as long as possible rather than be admitted to a nursing home.
Relying on Medicare or Medicaid to cover costs of long term care is a mistake. Medicare covers nursing home costs only for a short period after a hospital stay for acute illness or injury. Medicaid pays for some expenses, but only if you meet poverty guidelines for income and assets. And Medicaid pays for nursing home care, not home care.
Fact: The average annual cost of nursing home care in 2030 is projected to be $190,600. (American Council of Life Insurers, “Can Aging Baby Boomers Avoid the Nursing Home?” 2000)
One option is to look at Long Term Care Insurance for financial relief. When a loved one has long term care insurance, it enables the caregiver to continue his or her work responsibilities and have the peace of mind to pay for a caregiver in the home. A recent Employee Benefit Research Institute study put it this way: “Having adequate long term care insurance is the single most influential determinant of whether an individual will have a financially secure retirement.“
Generally, when looking into Long Term Care insurance, the younger you are when you purchase the policy, the lower the premiums are likely to be. The premium is also based on your health and type of plan, including factors such as:
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daily benefit - This amount can range from $50 to $250 per day.
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benefit period - You can choose a specific number of years or a lifetime plan
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elimination period (deductible) - Most plans have options such as 0, 20, 60, or 100 days.
The key to satisfaction in retirement for the baby boomers may lie in planning, not just for our healthy years, but for our last years of life when frailty might occur. Armed with both a financial and long term care plan for our later years, you can be free to take life as it comes, savor new experiences, and follow your retirement dreams. Long Term Care insurance should be a consideration when planning for retirement and the transfer of assets to loved ones. In some situations, the Federal Government has made premiums tax deductible (one should consult with one’s tax advisor). Protecting our nest egg and not becoming dependent on our children, friends, or Medicare should be a key priority. Consulting with an experienced, knowledgeable, and certified Long Term Care advisor and an elder law attorney is the smart thing to do. None of us can predict what will happen during our golden years, but we can prepare and plan for those uncertain times.
Armand S. Diarbekirian, LUTCF, CLTC (Certified in Long Term Care) is owner and managing partner of MetroWest Financial Partners, LLC (978-264-4999; Diarbekirian7@msn.com).
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