Money in the Middle

This blog is about generations — how to help each other financially and emotionally.  

So I couldn’t resist sharing the video about a young baseball player chasing his dream while living in an assisted living facility.  It’s heartwarming — a good reminder of how much the generations can share and learn from each other.

Here’s the link to ESPN E:60 story of Josh Faiola of the Lake Erie Crushers and his summer in an assisted living facility.

Here’s the video about baseball and assisted living.  A great reminder about how much we can learn from each other at any age.

Long-term care costs continue to rise whether care is for a nursing home, assisted living facility, home care or adult day care. The increase in costs reinforce the need for long-term care planning:  how you want to receive care and how you’ll pay for it. If you are a member of the sandwich generation this is an important issue for your future and your aging parents.

 According to the 2009 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services, and Home Care Costs.

• Private room nursing home rates rose 3.3% to $219 per day or $79,935 per year.
• Assisted living costs also rose 3.3% on average to $3,131 per month.
• Home health care aides now cost an average of $21 per hour, a 5% increase;
• Adult day services run $67 per day, a 4.7% increase.

 Many of us think that we’ll just get care at home which will be less expensive.  It all depends.  If you need assistance most of the day and night, then it is not less expensive than other alternatives.  But, home care is what most of us want, so at least use these hourly figures to help map out realistic potential costs for long-term care.

 If you think you are going to need to assist an aging parent with their care, these figures can help you better plan for financial assistance you might want to provide.

 When it comes to paying for long-term care, there are basically three choices:

You can purchase long-term care insurance to cover those costs, you can look at self-funding and wall off some of your assets into very safe investments so the money will be available when you need it, or you can hope you don’t need it and if you do deplete your retirement savings and then count on government programs.

Remember, this is custodial care not medical care.  So don’t count on Medicare or your health insurance to pay the costs of care.

Rates for care vary dramatically in different parts of the country, and even different parts of the state.  For example, in Maryland where I live, the average rate for a private room in a nursing home is $258; assisted living averages $3,873, a home health aide averages $20 per hour; a homemaker aide $18 per hour; and adult day services $75 per day.

Head up to Maine or Massachusetts and the daily rate of nursing care can hit $300. The MetLife survey provides rates for all states.

So it is very important to plan based not only on where you live now, but the costs of the area you might be moving to in retirement. 

If you are working, your employer may offer long-term care insurance as a voluntary benefit which means you pay the costs, but the policy may have some additional benefits such as less stringent underwriting.

If you are retired and interested in long-term care insurance, check out individual policies through a local agent or membership groups which may offer a discount.  Just make sure you compare a couple different policies since rates can vary dramatically.

Resources:

2009 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services and Home Care Costs.  

Long-term care insurance quotes in Maryland.

No matter how old we are, we’re all taking steps to trim spending – and hopefully pay off debt and or increase savings. .  Sandwich generation baby boomers seem to be making the most changes.  But it’s interesting to see that across the generations the recession is changing some spending behaviors.

Here’s the list from the latest Harris Poll.  Sure not hard to see why magazines and newspapers are feeling the pinch.  More of us are finding that bottled water is not a necessity. So many of us are taking small steps to improve our financial future.

I’d add cancelling a gym membership.  Done it myself and turned to walking outside and DVDs.

Also using more coupons across all generations in our households.

My echo boomer children would add – shopping in Mom’s pantry.

 Do you have any tips to add?
 

SPENDING/SAVINGS OVER PAST SIX MONTHS – BY GENERATION
“Have you done or considered doing any of the following over the past six months in order to save money?”
SUMMARY OF ‘HAVE DONE’

Base: All adults

Note: Percentages may not add to 100% due to rounding The Harris Poll^® #121, October 27, 2009 By Humphrey Taylor, Chairman, The Harris Poll

Another gloomy report on the financial prospects of retirement for baby boomers and Generation X. 

The National Retirement Risk Index from the Center for Retirement Research shows that today half of Americans will not have enough retirement income to maintain their pre-retirement standard of living.

 Here’s why:

1. Social Security benefits till replace a smaller fraction of pre-retirement earnings as the full retirement age rises from 65 to 67.

2. Fewer and fewer workers have a defined benefit plan (pays a set income) and must count on their 401(k) plans.  In theory, that’s okay.  In reality, most of us have made mistakes along the way.  That leaves the median balance at $78,000 for those approaching retirement. 

3. Most workers don’t save outside of their 401(k).

4. Retirement assets will yield less income, especially bond yields.  In addition, out-of-pocket medical expenses are expected to continue to rise consuming more of retirement income.

 So, those who were at risk of not being able to continue their lifestyle into retirement are more at risk than ever.  And those who were not at risk may find themselves at risk going forward – or at least closer to the line than they would like to be. 

______________________________________________

Percent of Households ‘At Risk’ at Age 65 by Cohort, 2004, 2007, and 2009

Source: Authors’ calculations.  CRRBC Oct. 2009 #9-22

 _________________________________________________

The good news is that younger households, who keep saving, may be able to catch up.  But for most baby boomers and seniors, time is not on your side for catching up.  The plunge in home values is one of the main reasons as many people looked to their home to fund their retirement.

 So what can you do? If you’ve planned well, have a pension and 401(k) and know the income you need for your retirement lifestyle – good for you!

 For the rest of us…unfortunately, there’s no magic silver bullet.  It’s a matter of doing what you can to adjust your lifestyle and continue to save as much as you can, in retirement funds and outside; work longer than planned to help build up retirement assets; pay down debt and calculate the numbers carefully on when to take Social Security.

 If you need assistance, get the help of a financial professional.  As friends for referrals and check with your 401(k) plan to see what financial planning tools and resources are available.

 It also time to accept that retirement won’t quit be they way you thought it was a year ago.  And an opportunity to help younger generations understand the importance of financial planning and starting retirement savings as soon as they can.

Resource:  National Retirement Risk Indes:  After the Crash

Medicare & You 2010.  It may not be on the top seller’s booklist but it is a book that any baby boomer approaching Medicare age or helping someone figure out their Medicare benefits should read.  And it’s free.

 Why is it so important to have a copy of Medicare & You 2010 about Medicare benefits?

• Because it can get you beyond the myths about Medicare to the facts about Medicare – what it covers and what it doesn’t.  It covers premiums, deductibles and what is covered and for how long. 
• It can help you unravel what you’ll be paying for Medicare in 2010 – whether it’s Medicare premiums, Medicare deductibles
• It can prepare you to develop a plan for what is not covered by Medicare, especially long-term care.

 When my father was going in and out of hospitals and rehab facilities after a major stroke, I found it one of the best resources in terms of unwinding what was covered and what wasn’t covered by Medicare.  In our case, he had a great Medicare Supplement plan, but of course that only pays when Medicare pays.  So you have to know the basics and what to question.

You can find Medicare and You 2010 online.  Each Medicare beneficiary receives a copy in the mail as well, but the online version can be handy if you are helping an aging parent.  

If you are a baby boomer approaching Medicare and trying to figure out Part A, Part B, part C and part D of Medicare, this is a great place to start.  If you are confused about what long-term care benefits are covered by Medicare (not many days) you can find the answer here. There are more resources at www.medicare.gov including a good questions and answers site about Medicare benefits.

 If you are beginning to budget for your 2010 health care expenses, and starting to shop for Medicare Advantage, Medicare Supplement or Medicare Part D this booklet can be a good place to start.

As the stock market climbs back from the deep dark depths of recession, many are feeling optimistic that the worst is over.  Maybe.  But continuing unemployment and foreclosures indicate that we have a way to go yet.   

Lots of articles too on people yielding to pent up demand and heading back out with credit card in hand.  Good for the economy; not so good for their savings plans. 

So since it’s National Retirement Savings week what is it that we can do to get started or get back on track to retirement savings.  There’s lots of advice out there.  Here’s the Retirement Savings Week site.

But I think that for many of us who are beyond the “why should I save” and are struggling with “how do I save for retirement now”, there are two “musts” that often get overlooked:

 1. Understand the financial products you are buying and how they fit in with your goals.

2. Understand who makes money when you purchase the product and what how their goals align with your goals.

 I recently received a copy of The AARP Retirement Survival Guide:  How to Make Smart Financial Decisions in Good times and Bad by Julie Jason. 

 While calling it a survival guide may be a bit over ambitious, it is a good guide to answering the two key questions above – how does the product really work and who makes money when you buy it.

 It’s a practical book.  Subject headlines like: Hint, WARNING and Julie’s recommendations help you shine a bright light on the pros and cons of the product.  That ultimately makes it easier to see if the product is a right match for you.  She also provides lots of good questions to ask and easy to navigate language free of financial jargon.

Lately, I’ve come across more people who are confused about the relationship they have with their “financial advisor.”  That person could be a broker, an insurance agent, a financial planner or a register investment advisor but many people think they are just different names for the same thing.  Not at all!  Jason has a great information and a chart (p.87) on who gets compensated in what manner.  It’s also easy to see who has what responsibility to you. Most often it is a standard of suitability.  Fiduciary responsibility is reserved for registered investment advisors who must put your interests ahead of his/her own.  It’s important to know the difference so you know what you should expect from someone advising you on financial products.

So if you’re a baby boomer or senior thinking of getting some help on what to do next with your retirement savings, The AARP Retirement Survival Guide is worth a read.  It can help you ask smart questions and make you more knowledgeable about what really can help you reach your retirement goals.

No cost-of-living adjustment for Social Security recipients in 2010.  That’s the official word today from the Social Security Administration.  The focus now turns to Congress to see whether they will  provide a $250 payment to each Social security recipient in 2010.

The supporters of the $250 payment say that seniors experience more health care costs and those costs are increasing much faster than the consumer goods formula COLA is based on.  AARP is contacting its members to tell members of Congress to support the payment.  President Obama endorsed it today.

I’m sure it will be welcome relief to those who are experiencing increases in  Part D drug plan prices increasing or Medicare Part C plan premiums. But I wonder when we will stop making exceptions to rules because we don’t like the outcome.

Take a deep breath.  It’s the one time of year when you can change Medicare Advantage or Medicare Part D plans. That can be good news, but it’s not stress free.

This year is even more stressful for thousands of people who are receiving notice that their plan is being discontinued and they have to select another Medicare plan.   If you or a family member whom you are assisting is in this position, start looking at options right away.

Here are some things to consider:

• If you have been in a private fee-for-service plan that has been cancelled and want to move to original Medicare (Part A and Part B) and purchase a Medicare Supplement plan and Part D plan, you probably won’t have to go through underwriting.  But ask, and make sure you know the deadlines by which you need to apply.
• Medicare Part D – most plan price increases have been modest, but if your health condition has changed during the past year and your medications have changed, it might be worth comparing your plan to others.  One key is the “formulary” that is the list of drugs and how the insurance plan covers each drug.  The differences can be dramatic.  The medicare.gov site has a part D plan comparison tool that can be very helpful in deciding whether to change plans.
•  Don’t just look at the premium.  Look at out-of- pocket costs, deductible and co-pays – especially for Medicare Advantage and Part D plans – when you are doing your comparisons
•  Remember, if you have just Medicare part A and Part B that will only cover about 80% of your health care costs.  A Medicare Supplement Plan and Part D close that gap. Generally, you have a wide choice of doctors and hospitals who accept these plans. 

Medicare Advantage plans wrap Part A., Part B and Part D (Usually) together.  The premiums are usually lower, but you’ll be restricted to a network of doctors and face more out-of-pocket co-pays.

 There’s no right or wrong plan—it depends upon your health care needs and preferences. That makes it harder, but also more important to take the time to look at options.  Given, the escalating cost of health care it’s more important than ever to make sure you have the best plan for your health care needs.

As the end of the year deadline approaches, it can be harder to reach companies for information.  So start now.

Find more resources at http://www.medicare.gov

Continuing care communities hold the promise of being a place where you can stay…as you age…and get the care you need.  Start in independent living and move through the phases (assisted, nursing home) if and when you need to. 

Financially they can also be a way of –hopefully – capping some of the catastrophic costs of aging.  And they can be a wonderful place to live and help older people lead a socially active life.  And provide peace of mind for family members.

But the financial model has hit some road bumps in the economic collapse. 

Generally, with a continuing care community – you buy in, at usually a significant amount of money, pay additional monthly fees, and then your family gets all or part of your buy-in back when you no longer live there.  That’s why it is so important to be confident in the financial resources of the community you are buying into. 

One award-winning developer –Erickson Retirement Communities– is one company that is struggling under the weight of underperforming real estate cutting back staff and new developments.

 (Here is the Baltimore Sun article on Erickson Retirement ) 

(Here’s a Wall Street Journal blog about Erickson communities)

 So, if you are looking at continuing care communities be vigilant in looking at the financial situation.  In the case of Erickson Communities, the individual developments are run separately so check on the finances of the one you are specifically looking at. The communities have a strong track record in service and refunding fees 100%.  so find out the specifics about the CCR you are looking it:  what’s the track record of returning fees; have the monthly fees been consistent or risen rapidly; is your buy-in price in line with the current market?

 Ask for deals.  If you are having trouble selling your home, you may be able to work out a short term solution that works for you and the care community.

And if you have any doubts, keep looking.  This is not the time to take a financial risk with your home and your health.