And regrettably neither Medicare nor Medicaid is among them
By Mike Takieddine
The major anxieties that plague our aging folks, besides those of outliving their resources, are about where they’re going to spend their golden years, and how they’re going to pay for those choices.
Unfortunately, Medicare does not pay for long term care, whether at home or in facilities. As for Medicaid, it is a state-by-state safety net for the ultra-poor -you have to have a net worth of no more than $3,000, or thereabouts, in order to qualify.
Staying at home is clearly the first choice for many of our aging parents:
Home is where they feel safest and most comfortable
And home often provides the least expensive option
Our elderly are going to need to hire help however to cope with their activities of daily living, so here are the 5 ways to pay for home care:
1) Funding home care with private means
When it comes to paying for in-home caregivers, a majority of families resort to dipping into their nest eggs. Such resources can quickly get depleted however, for in-home care gets expensive, particularly when many hours a day are needed.
When the responsible parties, usually the adult children, live close by and have a lot of time to dedicate to caring for their aging loved ones, they may resort to hiring privately, at around $11 or $12 an hour, and only part-time help. Not necessarily a great financial challenge there, though a likely taxing one emotionally.
But when the responsible parties are distant or entirely absorbed in careers, there is not much time for vetting caregivers, supervising them and filling-in at a moment’s notice when caregivers get sick or simply bail out.
A home care agency is needed in such cases, one that has plenty of caregivers and that can match the family with just the right aide. You have to allow for $20/hour there, perhaps a smidgen less for long daily shifts, and a little more if all you need is 4 or 5 hours a day. That’s when the bills can pile up.
2) Long-Term Care Insurance
You’re in good shape if your parents had the foresight to buy a policy when they were younger, for the cost of one gets quite prohibitive when they get into their seventies or eighties.
There are literally hundreds of such insurers, and you may screen them by calling the American Association for Long Term Care (LTC) insurance at (818) 597-3227.
Because benefits are not usually required before a lapse of many years from the time of purchase, make sure you are dealing with a reputable organization, and watch out for terms that put up hurdles for securing reimbursements.
The exact coverage you get is up to you, for you can choose from countless options. You only get access to your benefits however when you have bona fide (doctor-confirmed) medical needs, per terms that are specified in the policy you obtain.
You may purchase LTC insurance policies that reimburse a specified daily amount for a particular number of years (for example, $220/day for 5 years). By scaling up the daily reimbursement rate or the number of insured years, your monthly premium would naturally increase.
To assess monthly premiums, think in terms of buying a car on instalments. You may buy a middle-sized sedan for $400/month, or snazzier wheels for much more. The same goes for your LTC overage, so put on your forecasting cap and try to match costs with future needs –admittedly not an easy task.
3) Downsizing the home
Whether for financial or other practical reasons, and whether you’re in your eighties or upon retiring in your sixties, downsizing is often the option many families go for. You get to sell the house, buy or rent a smaller place –perhaps a condo or an apartment- and you get to keep some residual cash to keep you in good stead.
Besides, an apartment is so much easier to look after, which may easily translate to fewer caregiver hours each day to help with other chores.
Agency-hired caregivers provide companionship, housekeeping, meal preparation and escort-type assistance, as well as personal care services, such as bathing, grooming, dressing and medication management. A good agency-provided caregiver becomes like an alternate and indispensable daughter around the house, typically at a cost of around $20 an hour.
4) Reverse Mortgages
Reverse mortgageshave become popular, particularly for older persons who are intent on staying at home for as long as possible or, conversely, if you’re “house-rich and cash-poor”. Think of a reversed mortgage as a credit line that is granted you with your property used as collateral.
Here are the main prerequisites:
You must be at least 62 years old, must own your home outright or have a small mortgage outstanding, and must reside in your home
You must make timely and ongoing payments for property taxes, HOA fees and insurance (your income and other assets will be vetted to insure that you can meet those obligations)
A lender will thus make you a loan that is based on the estimated value of your home and your age or that of your spouse. You can either cash out the loan in a lump sum, or receive it by way of a credit line that you can draw from on an “as needed” basis.
You don’t incur any interest or other monthly payments until the very end. The interest you would pay would be only on the part of the loan that you cash out, and you would retain full ownership of your home until you either repay the loaned amount in full, with accumulated interest, move out of the home, or pass away.
Tens of thousands of seniors have found government-backed reverse mortgages to be just the right recipe for peaceful transitions into older age.
Perhaps more so than other investments, annuities are intricate instruments that require considerable diligence to unwarranted consequences. Having said that, annuities are best fitting for “cash rich” seniors who are particularly concerned with the prospect of outliving their resources. Here is the AARP site for annuities.
You can buy an annuity by using cash-on-hand and getting back regular payments over a specified period of time, or for the rest of your life (or your spouse’s if you have a joint account with right of survivorship).
One type is similar to life insurance in that it pays a specific amount/interest that is usually pegged to an index (like the S&P 500), while another is invested into vehicles like mutual funds and are exposed to stock market fluctuations.
Annuities that advertise “no downside risk” and plenty of “upside potential” are mostly of the life-insurance type. Go through their small print with the best magnifying glass you can lay hands on.