Long Term Care as Part of Your Multi-Generational Plan

For anyone who has dealt with an aging parent or grandparent the concept of long term care is likely a familiar one. Those unfortunate enough to suffer from Alzheimer’s or other cognitive illness can end up requiring nursing care that can reach and exceed $80,000 per-year depending on the quality of care. With modern medicine it’s entirely possible to live 10+ years after the diagnosis of a permanently disabling illness, meaning that a protracted period spent in a nursing home or with care for the basic activities of living will rapidly deplete your nest egg.  Long Term Care expenses, health care expenses and critical illness related expenses in retirement can wreak havoc on the best built financial plans.  These are points that need to be addressed as part of the overall risk management strategy in your financial plan.  

Who does this impact in the family?

Of course the family members suffering from illness are impacted physically, emotionally, and financially. Running out of money due to long-term illness is the last complication that anyone facing a health battle needs.

Unfortunately it’s often the children of those needing long-term care that are often most hurt by these costs and their associated impact on inter-generational family finances. Adult children may be raising children of their own at the same time as a parent begins needing nursing care. This is known as the “sandwich generation” phenomenon, and many baby boomers are currently finding themselves in this situation as their children head off to college and their aging parents face the prospect of potential long term illness or disability.

What is the worst case scenario?

In the worst cases the nest egg of the individual needing long term care is completely wiped out. This may necessitate any adult children dipping into their own savings to preserve their aging parents lifestyle and prevent them from ending up in a Medicaid facility. This in turn can cause grandchildren to lose out on attending the best possible education institutions as family funds are diverted to health care needs.

Those with substantial enough assets to avoid outliving their money, even in the event of a lengthy nursing home stay, still face the prospect of watching a life time of savings eroded in a few years as their estate is unnecessarily diminished. In the case of long term illnesses with heredity-linked causes this leaves less money for children or grandchildren to deal with their own possible care needs in the future.

How can you avoid contributing to the “sandwich generation” phenomenon?

Today there are myriad ways to insure against costly long-term care. Whether it’s a simple long-term care policy or a more complex strategy the one consistent message is that the younger you start planning the better. Not only is it easier to qualify for coverage with the best possible rates while you are young and healthy but it’s also possible to take advantage of investment and insurance strategies that can take years to properly implement. 

While there is no one size fits all approach it is possible to work with a financial planner who understands the risks of long-term care costs and how to utilize available savings and investments, long-term care insurance, and life insurance in a way that provides the best coverage mix for your circumstance. 

Insurance policies contain exclusions, limitations, reductions of benefits, and terms for keeping them in force. Your financial professional can provide you with costs and complete details.