Financial planning historically has been based around the “logical” conversations — those dealing in accumulation, returns and the numbers. That advice model has helped millions of people secure their financial future. But today, one of the biggest risks, long-term care, to a retirement portfolio, requires an additional type of conversation — one that also appeals to emotions.
The likelihood of needing long-term care is becoming more prevalent because Americans are living longer. In fact, the U.S. Department of Health and Human Services estimates that those turning age 65 have a 50-50 chance of requiring some form of long-term care services in their lifetimes.
When there is a long-term care need, that need affects more than just the care recipients. It also impacts family members, sometimes for generations to come. Our industry has struggled to make the connection to the next generation. Planning for long-term care is a family event that must include a family dialogue involving the children.
When you think of married couples, there’s a good possibility that at least one spouse will need care. Without a plan, could the other spouse become the caregiver to assist with everyday activities? Alternatively, children often become the caretakers. Today a number of middle-aged Americans are sandwiched between the responsibilities of raising children and caring for aging parents. This often creates stressful situations, financial burdens, or time out of work resulting in lost wages, benefits and retirement savings.
While number-crunching absolutely has a place in long-term care planning, numbers alone do not get at these types of planning dynamics.
Long-Term Care Emotions
A recent Lincoln Financial Group caregiving study found that 59 percent of parents who were asked about their child’s involvement in their care said they did not want their children to become their primary caregivers. Many, however, had no alternative plans. It’s only natural for parents to want their children and grandchildren to prosper; so when parents avoid long-term care planning, most likely they aren’t considering the consequences.
Participants in the study had a wide range of emotional reactions when asked about the prospect of suddenly becoming a caregiver. While 52 percent expressed feelings of compassion, 44 percent said that they’d be overwhelmed. Some other emotional responses included 38 percent who would feel needed, and 27 percent who would feel either anxiety or a sense of obligation.
Many individuals said they are willing to help their family members with caregiving tasks, particularly those related to personal needs or daily tasks. For example, 79 percent would assist with cooking and feeding, and 75 percent would help with cleaning and transportation.
However, when it comes to making more significant sacrifices, people are more reluctant about providing assistance. Just 35 percent said they would cut back work hours or quit their job to provide care. Similarly, only 35 percent would pay to place someone in a home or facility.
Even though relatives may have good intentions about helping someone in need, they’re often unprepared to do so. They may not be able to perform some of the more strenuous activities, such as lifting the patient or helping with incontinence. Another reality is that family members may not have the option to take time off from work to provide the assistance that’s needed.
Starting the Conversation
Unfortunately, when a loved one needs long-term care, it’s often an unanticipated event. Without a plan in place, this can lead to very rushed care and medical choices if family members do not know the care recipient’s preferences. It can also lead to expensive financial decisions. To help avoid that, advisors should work with clients on their long-term care strategy as part of their retirement plan.
Start by getting the family together and asking spouses, parents and adult siblings “what if” questions. When a family meeting isn’t an option, help clients get conversations started with their loved ones. Encourage them to think about what long-term care actually involves.
Ask parents who haven’t planned what they would expect of their children. Do the children live nearby? Can they afford to take off from work or quit their jobs to provide care? How would this affect their families? Ask wives and husbands questions about maintaining a healthy relationship with their partner should they need care. Would they want to enlist the help of professionals? Ask adult children questions like: What if your dad needed care? Would you be able to take time to shop for him or clean the house? What about helping him bathe?
Also encourage family members to start thinking about the financial realities of long-term care. It’s not uncommon that people believe they’re protected with Medicare, Medicaid or health insurance. But these options offer minimal to no coverage, or come with stipulations. Often individuals underestimate the costs of care and expect to pay out of pocket. Help your clients gain an understanding of long-term care costs where they live in order to determine whether this is realistic.
For those clients who opt to self-insure, ask them which assets they would bring to bear or sell in order to pay for care and how that might affect a surviving spouse or legacy plans. Today there are many different types of long-term care funding solutions available in the market that can help clients mitigate the costs of long-term care and potentially preserve these assets.
Solutions gaining particular traction today are life insurance/long-term care combination products. These dual-purpose products provide a benefit to clients or their family whether long-term care is needed or not. According to LIMRA, that is one of the reasons why life insurance/long-term care combination products have climbed to $3.6 billion in premium sales in 2016, up from $2.4 billion in 2012.
An unplanned long-term care event can have a far-reaching impact on care recipients and their families. Much of that impact is financial, but there is much more to consider, especially when it comes to family caregivers. The considerations include stress, physical well-being and career aspirations, to name a few. As long-term care continues to come to the forefront, we as an industry need to continue developing ways to discuss this risk with clients by having both an emotional and logical conversation with clients and families together.