February 29, 2012 · 11:32 AM
by Carolyn Rosenblatt and Mikol Davis
Is there a possibility that our parents can run out of money because they are living so long?
We’ve seen these situations all too often lately.
Consider Daniel. His parents were wealthy. They owned two lovely homes and lived a luxury lifestyle, fit for the successful business tycoon Daniel’s Dad had been for many years. He retired and they continued to spend lavishly. The years passed and they grew infirm.
They sold their homes at a loss during the economic downturn and moved to a high end assisted living facility. He’s 97. She’s 95. It cost them over $15,000 a month between the two of them. Then, his Dad had a stroke. The cost of care went up. There was no long term care insurance and the cost of assisted living was not covered by Medicare.
Mom’s needs also increased. She lost her vision. More cost increases for more care. The bill was now over $10,000 per month for each parent.
When Daniel finally had a discussion with his parents, he was horrified to learn that they had no savings, that they were rapidly spending the funds they had left in their stock portfolio, which was sold at inopportune times because they needed the cash, and that they were going to need his help!
Daniel had never talked to his parents about what he might expect to inherit. He just sort of assumed that he’d get a chunk of money to help with his own retirement. After all, they never held back on spending and he figured things were fine.
Now he writes a monthly check to help support them.
Is this a wake-up call? Could this happen to you?
Few of us spend the time to actually calculate the cost of care in a care facility or full time if our aging parents need help at home. It’s time to do this. The cost of around the clock home caregivers can run over $100,000 per year, per person in CA. It can be nearly as expensive in a nursing home or assisted living facility. If that goes on for 10+ years, parents can easily burn through savings and assets.
Parents are living longer than ever. It’s likely that little attention was paid to the cost of care when your parents did their estate planning. Parents resist the subject. Lawyers who draft their documents don’t calculate it in. No one wants to accept the possibility of needing help and paying big bucks for it.
If this could be you, it’s time to meet with your parents and their financial advisor. Plans need to include the possibility of long term care. It’s too late to get long term care insurance when your parents are ill, disabled and in their 80’s or 90’s. No one will insure them, or the cost will be prohibitive
Daniel would have been better off if he had been bold enough to ask his parents about the possible need for care at the time he first saw changes in their health: decreasing vision in Mom, more and more unstable health conditions in Dad. Reining in spending, getting professional financial planning advice and setting up a way to pay for the cost of care would have helped.
We can all do better than Daniel did. I urge everyone, even those whose aging parents seem just fine now, to talk to them about the cost of care and how to pay for it. If no planning happens, the cost could fall on you!
Contact Raleigh Geriatric Care Management for assistance.