Elder care, financial plans, the future: Are you ready?
by Karl Fendelander
Are you saving enough for retirement and elder care costs? A financial planning expert advises on how much to save for future long-term care.
As a culture, we're starting to get over the belief that we're only going to live until age 60. Thanks to the medical and health advances of the last hundred years, living to 100 isn't uncommon. The trouble with this reality is the lack of long-term planning for medical care and other expenses.
In our grandparents' time, a broken hip could be a death sentence, says Nancy Mullins, Administrative Manager for Department of Senior Services for Washoe County, Nevada. Mullins notes that people today are surviving a lot of things, and rehabilitation efforts have improved. Now that we expect to live a lot longer, planning not just for retirement but for elder care has become incredibly important.
"There are efforts to push for long-term care as something you need to plan for -- for example, National Caregivers Month," says Mullins. "This is a multi-generational thing now and really wasn't part of our culture before."
Elder care finances
Dr. Joseph Hollen, M.D. and Certified Financial Planner, worked as a doctor for 23 years in emergency medicine, but he became a financial planner in 2004. He deals with people of all ages looking to plan for the future. Hollen spoke about studies that show how much you need for health care beyond retirement, estimating that the average out-of-pocket medical cost for a couple retired in their early to mid 60s is around quarter of a million dollars -- but it could be several hundred thousands of dollars.
It's important to realize that options and benefits available to previous generations may not necessarily be around anymore. Dr. Hollen notes that 30 years ago many people had company pensions and Social Security in addition to personal savings.
"Now company pensions have pretty much gone away," he says. "It's taken a while for people to really wake up to that."
In addition, long-term care costs have risen. The national average daily rate for a private room in a nursing home climbed 4.4 percent from $229 in 2010 to $239 in 2011, according to the MetLife Market Survey of Long-Term Care Costs.
How to plan for elder care costs
When should we start making elder care financial plans? Hollen's take on saving is a touch sobering for those who haven't yet gotten started. He recommends starting to save 10 percent of your income in your 20s, but he fears that not enough people are doing that:
We should all be living below what we make and saving the extra…That way, by the time you get out to age 65, you will be able to replicate your lifestyle if you always lived on 90 cents on the dollar. The problem is if you wait until you are into your 30s, you don't have as long with the compounding money. That number goes up to 18 percent in your 30s to save to retire. If you start in your 40s, 40 percent is what you should be saving.
Even during financially tough times, it's important to save as much as you can, which means living below your means. If you haven't started saving yet, or you're still working on paying off debts, sit down with a financial planner. Those savings can come in handy for your own future and also if you find yourself a caregiver for your loved ones.