Is long-term care a big risk to retirement?

By Richard T. Romano

The Daily Record Newswire

One of today's biggest myths is that people can invest their way to financial security. This incomplete approach, focused only on stocks and investing, has created a gap that's resulted in millions living with anxiety or a false sense of security.

I urge people to close the gap and build a full picture financial plan one that integrates investments to grow wealth with risk protection products to help defend what matters most. When you replace vulnerability with doubt with confidence, you can enjoy today knowing that you've planned for tomorrow. That's when you can live life differently.

Many families have retirement challenges like stock market volatility, inflation, taxes and their own longer lifespans. But in my experience, one of the biggest threats to retirement is also one of the least addressed-that's the cost of long-term care.

Long-term care refers to services provided to chronically ill people provided either at home or in an assisted care or nursing home facility. These services are generally needed for an extended period of time and may not "cure" or "heal" the individual receiving them. Long-term care services help with activities of daily living including for example eating, bathing, dressing.

In 2015, the Department of Health and Human Services reported that 70 percent of Americans reaching age 65 will need help with everyday living activities at some point in their lives, either because of a debilitating injury or a chronic illness, such as Alzheimer's, stroke, heart attack or diabetes.

Yet few have a plan in place to address this possibility. In fact, the DHHS has found that less than one-third of Americans age 50 and older have begun saving specifically for long-term care.

Like many, you may believe that Medicare or Medicaid will cover the entire cost if long-term services are needed. Not so.

Medicare provides only limited coverage and only in specific circumstances. Meanwhile, Medicaid pays for many long-term care services, but only for those who meet the eligibility criteria with low income and few assets. Without proper planning, you could easily drain your retirement nest egg and run through a lifetime of savings, even if you're "lucky" enough to only need long-term care services for a relatively short period of time.

More than five in ten Americans (53 percent) in an April 2014 Gallup poll said that they feel stressed that they may not have the resources to pay medical costs due to a serious illness or accident.

Two of my clients fit into that category. This New Orleans couple watched the wife's mom struggle with dementia and the wife's father struggle with the emotional and financial burdens of caregiving. Without any financial plans in place, $7,000 per month was being spent, draining their retirement accounts while draining the caregiver's enthusiasm and energy. Watching their struggles inspired them to plan now for tomorrow's challenges.

Planning now for the possibility of long-term care can give time to explore the options for preserving your quality of life and your assets. You can make health care decisions to ensure your values and wishes are honored if you can't make decision about your medical care for yourself. You can make legal decisions about how your affairs should be handled if you are unable to handle them yourself. And you can make financial decisions to help ensure your assets are used to provide for you and your loved ones in the way you expect.

Most people envision themselves living a long, active life in retirement. The reality is, the longer you live, the greater the chance that you may require long-term care. A financial professional can help you see the big picture. This includes prioritizing your goals, mitigating the challenges to retirement and understanding how the potential need for long-term care could impact your assets, your family and your future.


Richard T. Romano is a Northwestern Mutual wealth management advisor based in Metairie.

Published: Fri, Apr 22, 2016