The changes were gradual and subtle. First Annette’s dad tore his patellar tendon. Annette could see he was struggling to navigate stairs in their two-story house. Then she noticed her mom seemed to have more issues keeping up with the housework. Next, her parents cut their cable subscription. Then it was fewer meals out and vacations.
“What’s up?” Annette thought. “What’s the plan?” she wondered. Annette wanted to ask, but the words didn’t seem to come. Her parents had never shared details about their finances or their plans for the future. Perhaps they felt it wasn’t her business.
While encouraging aging adults to plan ahead might be a challenge, not doing so could put future financial stability and living preferences at stake for seniors and their families.
“The biggest problem is that many people, because of a reluctance to face these kinds of issues, may fail to do so,” said Beth Ludden, Senior Vice President of Product Development at Genworth Financial. “That leaves individuals potentially at financial risk in their final years.”
Opening the door to the conversations might be daunting. Consider these approaches: “Financial downturns have hit us all hard, Dad. Should you consider downsizing?” Or, “Many people have to scale back their plans for retirement. Perhaps a financial plan would help, Mom? I’d be happy to help you work this out.”
Suggesting your parents reassess their life situation and priorities could help make their later years more meaningful. Regularly asking and answering the following questions may determine how someone’s life plays out, according to Ludden and the experts at Home Instead.
7 Questions to Ask Your Aging Parents About Their Financial Plans
1. How do your parents want to live their final years? Think of the final years in broader terms than just retirement. How do your parents see their lives unfolding? Is their goal to remain independent to the end? And where do they want to be at the end – at home or in a care community? “Consider that some of those years will be more active than others,” Ludden said. Ludden noted that it’s important to involve a financial professional, such as a financial planner or life insurance agent, when your loved ones start thinking about final years planning to ensure they have the means to support their goals. Final Years Planning: Where to Find Assistance can help you learn more. Help your parents plan the fun part as well as those aspects of care they’ll need to have in place as they age. “Ultimately getting organized helps people feel more relaxed,” Ludden said.
2. Where do they want to live? Ask someone where they want to spend their final years and most will say “at home.” That’s what a number of studies have revealed. Unfortunately, it’s not always that simple. “Do your parents have a practical plan to address their final years at home, will assistance be available and who would they like to help them?” Ludden questioned. “All of those issues will impact the financial plan they should put in place.”
3. What’s the plan if your loved ones need help? Experts say that 70 percent of people will need long-term care at some point in their lives, according to the U.S. Department of Health & Human Services. But people often are more willing to talk about death than they are disability, Ludden said. In fact, North American seniors are more comfortable planning for their funerals (79 percent) than planning for when they need full-time care (74 percent), or hospice or palliative care (71 percent), according to a survey conducted by Home Instead Inc.
Medicare is designed to pay for acute care situations, such as hospital stays or doctor visits,” Ludden said. “There are very few provisions for long-term care service – only as an outgrowth for acute care and only for a brief time as long as someone is showing increased progress. Because people mistakenly believe that Medicare pays for long-term care costs and individuals are required to spend down their assets to receive Medicaid, many people have lost assets they’ve wanted to preserve,” Ludden added.
Check out more information about what Medicare does and doesn’t cover. There are ways to cover such care, Ludden explained, even at home and in a disabled condition. “Many long-term care insurance policies sold currently provide for home care that is designed to support activities of daily living that cover a wide range of providers.”
4. Does your family know the cost? Costs of care can be sobering. According to a 20119 Genworth Cost of Care Survey survey, national median monthly costs for assisted living were $4,051. Median nursing home monthly costs were $8,517 for a private room; semi-private was $7,513. Rising costs may increase the urgency for many to create a plan. Home care remained the most affordable option at $4,290 a month for homemaker services and $4,385 for a home health aide.
5. Are products and services in place to support a plan? The good news is that a variety of long-term care plans exists to meet varied needs and budgets, Ludden said.
Traditional long-term care policies. These are stand-alone and designed to pay for the types of services someone would need in a chronic care situation, whether in a nursing home, assisted living or at home.
Hybrid products. These are life insurance or annuities with a long-term care insurance rider. While someone is living, these types of policy riders allow people to access a portion of the face amount of the policy to meet their long-term care needs.
Combination long-term care and life policies. These plans have living, long-term care insurance benefits that mimic more of the stand-alone types of long-term care insurance products. These policies can be designed to pay out monthly rather than in a lump sum.
An underwritten immediate annuity. These can be helpful for people who did not plan and would like to stretch their dollars. “This product pays out a guaranteed lifetime income based on an initial lump sum premium. “This type of product can help cover an immediate financial need for someone who is already impaired and looking for a way to get the most out of their dollars for care,” Ludden added.
6. Is the plan flexible? Circumstances sometimes change plans sooner rather than later. “Events may be the trigger to look at a financial plan,” Ludden said. “Unexpected deaths in the family can be a factor, as can family moving away. Life events are much more of a line of demarcation to reassess the plans you’ve made. If someone has planned adequately, it may not be necessary to make frequent changes. In fact, that’s one of the benefits of putting a plan in place.”
7. Does your family know about your parents’ plans? It’s important that family members know about their parents’ plans and that they share specifics about the types of products and services they have in place. “In the event an individual becomes disabled or impaired, long-term care insurance companies do have mechanisms in place to alert someone to the fact a bill has not been paid or an important change has been made to their product or service. Also, there are required protections in place if someone’s policy would lapse as a result of a cognitive or physical issue.” Regardless, having a beneficiary on a policy or a power of attorney designated can reduce the risks of being vulnerable.
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