Toileting and Retirement, Should I Purchase Long-Term Care Insurance? Part 1

The following is an excerpt from 20 Retirement Decisions You Need to Make Right Now. This is part one in a series about long-term care insurance.

"Toileting” is not a term you’d expect to find in a retirement-planning book like this. However, it is a term that describes what many retirees, their families, and caregivers must face every day. The definition of toileting is “getting to and from, and on and off, the toilet and performing associated personal hygiene.” As you age and your health deteriorates, you may need help with many of the things you take for granted today. If you do need assistance performing the basic activities of everyday living, who is going to provide it for you? Not being prepared for this possibility carries some devastating consequences, such as prematurely depleting your assets, receiving substandard long-term care, or becoming a burden to your family.

How interested do you think your children would be in applying for the following job listed in your local paper’s Help Wanted section?

Home Healthcare Aide: Home healthcare aide needed to provide twenty-four-hour, seven-day-a-week care for a poor, eighty-five-year-old bedridden patient suffering from Alzheimer’s disease. The elderly patient requires room and board and must move in with you and your family. The patient requires constant supervision and will need a baby-sitter when you leave your home. Must be able to administer eight to ten medications daily and make frequent trips to the doctor’s office. Applicant should enjoy cooking and cleaning and be proficient at toileting. Diaper changing skills are also a plus. The job will likely last one to two years but may last ten or more. This is a volunteer (unpaid) position. No experience necessary.

Now ask your children how they would feel about accepting this healthcare aide position if you were the patient needing the care. Would you like to heap this burden upon your children and their families? If you don’t want to take the risk of becoming a burden to your family, you need to do some planning. You can either purchase a long-term-care insurance policy or acquire sufficient assets to provide for both you and your spouse if you should enter a nursing home during retirement.

Becoming a Burden to Your Family

The above scenario is one Howard and Karen Everett know all too well. Three years ago, while visiting Karen’s eighty-four-year-old parents, Glenn and Shirley Kramer, Karen discovered that the Kramers were no longer able to take care of themselves. For example, Karen noticed that her parents weren’t washing their clothes regularly, and when they did wash them, they did it by hand because they couldn’t remember how to use the washer and dryer. Karen also noticed that her parents left the stove on frequently and were eating spoiled food. Cleanliness was becoming an issue.

It looked as if Shirley and Glenn had forgotten how to live. It was clear that Glenn was beginning to exhibit some early signs of dementia, and Shirley was diagnosed soon after with Alzheimer’s disease. Allowing them to continue to live alone would be dangerous. They clearly needed help.

Because of her parents’ limited assets and lack of planning, Karen believed that she and Howard had only two options: they could place her parents in a nursing home and let Medicaid pick up the bill, or they could move Glenn and Shirley into their own home and take on the daunting task of twenty-four-hour care.

They started to explore nursing-home options and visited several inexpensive homes. Unfortunately, the facilities were run down, often smelled bad, lacked cleanliness, and were understaffed. The Everetts concluded that their parents deserved better and immediately made arrangements to move them into their own home. Little did they know what they were getting themselves into.

Most of us wouldn’t have the stomach and stamina required to take care of one elderly parent, let alone two. Watching up close as both parents completely lost their dignity and were reduced to the equivalent of one-year-olds took its toll emotionally and physically on the Everetts. Would you like your children to do for you what Karen and Howard did for their parents? Consider for a moment their daily routine.

Karen worked around the clock, cooking, cleaning, bathing, toileting, dressing, feeding, blowing noses, administering medicines, clipping toenails, changing bed sheets when wet or soiled, cleaning up when accidents occurred because of incontinence, changing diapers, answering the same questions over and over, and helping them find their beds when they wandered the house at night. Around-the-clock care was utterly exhausting.

Although less costly than a nursing home facility, home care carries its own financial drain. Adult diapers and specialty dietary items are not cheap. Utility costs also increased, since neither parent could sleep with the lights off. Home maintenance costs rose, because of accidents such as the basement flooding when Shirley left the water running in the bathroom. Also, many modifications were made to the home to assist with deteriorating physical health.

The Everetts’ lifestyle changed completely. Three years ago, with their kids grown, they were looking forward to winding down Howard’s career by traveling and enjoying their increased freedom. This is not exactly what happened. All travel was completely out of the question. In fact, it was difficult just to go the store. Somebody always had to be home. This meant that the Everetts rarely, if ever, went out together or even visited other relatives. If they did leave the house, they had to find a baby-sitter. Their married and college-age children helped out when they could but weren’t always excited about having to change Grandma’s diaper.

Besides not being able to leave the house, Karen and Howard found that they couldn’t have friends over, either. Shirley had difficulty getting dressed by herself, but she had mastered the skill of taking her clothes off (and often did), making stark-naked appearances at the least expected times. Most dinner guests would prefer not to see an eighty-four-year-old in her birthday suit. Their only social outings, it seemed, were occasional visits with support groups to cope with the pressures of taking care of elderly parents.

The worst component, however, was the realization that their relationship with their parents had changed. Adoration grew into aversion, and respect decayed to resentment. While they still loved their parents and would continue to provide the needed care, they privately wished their parents would have been more wise by preparing for this stage of life.

So what advice would the Everetts give you? “Buy long-term-care insurance. You will maintain your relationship with your children and grandchildren, and they won’t have to experience with you the loss of your dignity.” The Everetts felt so strongly about this that they bought themselves a long-term-care policy to cover the costs of professional care.

Leaving Your Spouse with Nothing

Let’s fast forward to the day you reach age eighty and assume you enter a nursing home and stay for five years before dying. Let’s also assume your spouse is healthier and younger than you. Could the assets you’ve accumulated cover the additional expense of a nursing home stay? A nursing-home stay could double your annual retirement expenses. Of course, in addition to covering the cost of a nursing home, your spouse, who will likely continue to live in your family home, will still need money to meet the expenses of everyday life. And who knows, your spouse may need a continued stream of income for another twenty years.

If your assets aren’t sufficient to cover the costs incurred by your going to a nursing home and also the continued cost of retirement for your spouse, then you are a candidate for long-term-care insurance. If your nursing-home stay completely drains your nest egg, your spouse could be literally left with nothing but your home and a monthly Social Security check. No one wants to be forced to live on Social Security alone.

$500,000 to Spare or $0 and Destitute

David Sanders, a sixty-two-year-old office manager, plans to retire this year and begin enjoying the good life with his wife, Mary, age sixty. According to his retirement calculations, he has accumulated enough money to enjoy a $50,000 annual retirement income (after taxes and inflation). In fact, using modest rates of return, his projections show that thirty years from now they will still have a nest egg of more than $500,000. A modern-day success story, right? Well, maybe.

One thing David did not plan on is the possibility that some of their assets may be needed to cover long-term-care expenses. What would happen if either David or Mary require nursing-home care sometime during retirement? Could their nest egg withstand the additional expense? To answer this question, David needs to take a few extra steps in his retirement calculations.

What if, at age seventy, David enters a nursing home that costs $60,000 per year and stays for five years before he dies? Of course, $60,000 per year will have to be withdrawn from the Sanders’s nest egg for five years to take care of David in the nursing home, while Mary will continue to need $50,000 of income each year to cover the originally planned retirement expenses. The additional nursing-home expense will more than double the amount they must withdraw from their investments during these years. Should this occur, their investment assets would be completely depleted by the time Mary is age eighty. She would have to live out her remaining life on Social Security alone.

If David does not require this nursing-home care until he reaches seventy-five or eighty, their assets would last a little longer. Mary would run out of assets at age eighty-one and eighty-three, respectively. Needless to say, an extended long-term-care stay by David would leave Mary penniless.

The Sanders have two basic options: accept the risk of depleting their assets and do nothing in hopes that neither one of them requires care or purchase a long-term-care insurance policy to cover the cost of long-term-care expenses should they arise. What would you do? Have you considered long-term care expenses in your retirement projections?

Click here to read part 2 in this series.

Comments

[Money Reasons]

I've thought about it, but I'm far enough way that only passingly... the only thing I can think of to do is keep trying to make more money, keep (restore) my health, and hope for the best.

If I were smarter, I'd would start to buy long-term care insurance while it's cheap for me...

Based on reading your post over the years... If I had your net worth and current income, it would be a slam dunk. I would definitely buy the insurance!

[crashdamage1957]

Whoa this is depressing. I understand the merits of preparing for worse case scenarios , but this is just too depressing to think about..

[J.P.]

Depressing, yes, but a reality some of us are already facing with a parent. I'm glad to see the topic covered because this example is a good start at the issues to be faced. Alzheimer's is the cruelest of fates we will encounter on this earth.

[MasterPo]

Physical health is easy. Mental health is hard. The body can outlast the mind. Caring for an older family member with deminished mental capacity is just as costly (and emotionally/mentally) draining.

The word "burden" maybe unpleasent, even rude, but factually correct.

[dd]

Great article for those of us with parents getting close to the point for assisted living. It would be great if some of the readers could post real-life examples of expenses they have seen. It would be even better if they could share examples of how this is handled financially.

For instance, is there a way of securing assets to shelter them from being lost ? If insurance is the best option what are some of the key points we need to consider when shopping for this ? Is it cheaper to buy it at a younger age ? Is there a threshold for benefits ? Are there different types of policies?
If so, what are the pros & cons for each? Is there a way to make this all work more efficiently ? Are there hidden dangers we need to know about?

[Georgia]

I am too old to get long-term care. As a nursing home resident told me yesterday - she was able to get some, but her husband could not. He was too old to get it.

As for the Sanders example. I think you were way too downside on that. You said $60k per year for husband in a nursing home and wife still withdrawing $50 per year, as they had planned for a great retirement. Why would she need to withdraw $50k per year for only one person? That seems excessive by anyone's viewpoint. Why did you do this? Do you have a good reason?