Financial Planning for Assisted Living

O

Odduck

Confused about dryer sheets
Joined
Aug 7, 2021
Messages
9
After staring at spreadsheets, FIRE, Flexible Retirement Planner, etc. I retired earlier this year and have been caring for my parents. They have a fair-sized nest egg, but it isn’t huge. We’ve discussed the possibility of moving them to an assisted care facility that could provide better care today and would be able to provide more care later on.

I’m having a hard time getting a clear figure of what their spending has been, but well, OK, maybe we can assume only certain costs remain for the next phase of life and then add them to the known costs of assisted care for both, assisted for one and nursing for the other or nursing care for one and memory care for the other… so many ways this could go. 75k/yr for assisted care, 175K/yr for assisted for one and nursing for the other. They have a long term care policy, but it isn't clear what it covers for assisted living unless you meet all the requirements for nursing care.

And then who knows how long they’ll live? When you’re looking at FIRE, etc. and figure a life span of 85-95 when you’re 60, that’s a fairly small range as these things go. The Social Security Administration actuarial tables show they both have around 5-6 years left on average. One has had strokes and heart attacks and is on great life-extending medications while the other has no life-conditions issues. So it could be 2 years and 4 years, or it could be 5 years and 10 years.

We met with their financial advisor who looked it all over and said they’re looking fine – they have more than lots of their clients, but umm, a plan? A graph? A confidence level? Monte Who?

Has anyone planned out the last years with elevated spending to figure the odds of making it?
 
Odduck said:
Has anyone planned out the last years with elevated spending to figure the odds of making it?
Click to expand...
Sure, many times. It's a must if you want to participate in the LTCI vs. self-insure discussions. I just used FireCalc. The potential expenses and the length of time can vary extensively so it's a crap shoot and you can only plan for the worse. Don't expect a narrow range of outcomes. We're 77 yo. I entered $350k annual expenses for 15 years and we made it OK. That would be an unrealistic worse case scenario where we both need full nursing and/or memory care for 15 years. Very unlikely scenario, but we'd be OK financially. YMMV.

The distribution of possible outcomes for expenses for the last decade of life is so broad, you're kidding yourself if you're looking for a narrow range of outcomes to plan for.
 
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I haven't. I like @youbet's idea of running sensitivity analyses in FIREcalc. You can put in an extra expense of $X starting in year Y on the second tab, so you could explore scenarios.

My Dad is 88 with mixed type dementia and living in memory care now. No LTC but he has assets and SS and a small pension which should cover him as long as necessary.

I have noticed on his expenses that as he progressed from independent to assisted to memory care, his other expenses tapered off. He was traveling as recently as a few years ago, but now his expenses are basically his memory care bill, taxes, and his credit card expenses, which are generally just additional medical-type devices and bills.

At times with my Mom we considered in home nursing care, but that was eye-wateringly expensive and although they could have with their assets they chose otherwise - mainly it was a practicality because my Mom only would have needed a nurse occasionally but unpredictably, so it didn't make sense to have a nurse there 24 hours at $40 an hour or whatever for the one hour my Mom might need one. Point is, nursing is expensive - at that point I think assisted living is a better choice.

Other than running FIREcalc, I think what you have to do is just make the best decisions you can as things go along, and adjust as you go through it. Worst case they could run out of assets and I think end up on Medicaid, which I imagine is tremendously stressful but at least it is something and I don't think they'd end up homeless. Sometimes the kids kick in for care, but I don't personally think that should be an expectation or a plan.

The range for memory care around here varies from $4K a month to $10K a month (per person). Note that once a person is in assisted living or memory care, they may be able to deduct all of their room and board in addition to their medical care fees on Schedule A as a medical expense. This can be a significant tax benefit for them. Check IRS Pub 502 and/or their tax preparer (or @cathy63 :) ).

I've said many times that it does seem to me that it is usually somewhat self limiting - most diseases that cost a lot of money also shorten lifespan. The one exception I have seen is "healthy" Alzheimer's patients where the mind is gone but the body is still living for a decade. I don't know what to do in that scenario. (Although my Dad has Alzheimer's I don't think that this will be his path.)

It should be straightforward to get the LTC policy information from the company. I think it's usually $X per day after a Y day elimination period provided they meet the criteria. Maybe @harllee can input since I know she worked with her Mom's LTC company recently (and had a bad experience, btw). In fact it'd probably be a good idea so you have time to review it, learn about it, and get questions answered before their health makes the LTC policy time critical or causes a cash flow crisis.
 
Everything SecondCor said.

Note, I ran Firecalc just yesterday for my brother. At first I got a poor result until I realized that I was adding his LTC costs on top of his current living expenses.

Remember to factor in a large reduction in their current expenses when adding LTC costs to the analysis.
 
Odduck said:
. . .

Has anyone planned out the last years with elevated spending to figure the odds of making it?
Click to expand...

Yes. Part of the plan is to delay certain income streams to allow for greater monthly income, i.e. SS, annuities, while the rest of the plan involves a certain amount of asset preservation for later years.
 
marko said:
Everything SecondCor said.

Note, I ran Firecalc just yesterday for my brother. At first I got a poor result until I realized that I was adding his LTC costs on top of his current living expenses.

Remember to factor in a large reduction in their current expenses when adding LTC costs to the analysis.
Click to expand...
That’s my reasoning. I’m single so it’s far simpler but when I look at what I’m spending but subtract housing, car, travel and, if necessary, charity and 529 contributions, there’s enough left for LTC.
 
athena53 said:
That’s my reasoning. I’m single so it’s far simpler but when I look at what I’m spending but subtract housing, car, travel and, if necessary, charity and 529 contributions, there’s enough left for LTC.
Click to expand...
That's been my experience firsthand. Even the healthy spouse's expenses go down radically. No second car, big vacations, second home, boat, nights out etc. They spend all their days eating a sandwich with the sick spouse. My take is that the LTC costs are not in addition to one's current costs, but are instead somewhat less.
 
Long term memory (or other) care is sort of the one thing that could sink many otherwise well planned retirements. We've attempted to have belt and suspenders with LTC and "extra" assets. Still, at $120K/per year for one person (and rising) memory/nursing home care is capable of going through even decent savings in a hurry. I don't know the answer unless it would be to bolster the nest egg to 10 Million (not likely in our case!) I guess all we can do is, well, all we can do but YMMV.
 
Koolau said:
Long term memory (or other) care is sort of the one thing that could sink many otherwise well planned retirements. We've attempted to have belt and suspenders with LTC and "extra" assets. Still, at $120K/per year for one person (and rising) memory/nursing home care is capable of going through even decent savings in a hurry. I don't know the answer unless it would be to bolster the nest egg to 10 Million (not likely in our case!) I guess all we can do is, well, all we can do but YMMV.
Click to expand...
This ^^^
Basically, my goal is to leave my daughters with a million. More would be better but the million is basically my savings for this type of situation. It's either the DD's inheritance or money for our care. I don't have ten million or what ever it would take to be assured that me and DW will have enough for final healthcare if things go off the rails. Accordingly, our plan is to do the best we can. We do our best to live a healthy lifestyle and financially we live within our means. About the only thing I can think of that I probably should consider is some type of asset protection so that we wouldn't have to spend down every last dime in order to go on Medicaid - leaving the other spouse broke.
 
Jerry1 said:
This ^^^
Basically, my goal is to leave my daughters with a million. More would be better but the million is basically my savings for this type of situation. It's either the DD's inheritance or money for our care. I don't have ten million or what ever it would take to be assured that me and DW will have enough for final healthcare if things go off the rails. Accordingly, our plan is to do the best we can. We do our best to live a healthy lifestyle and financially we live within our means. About the only thing I can think of that I probably should consider is some type of asset protection so that we wouldn't have to spend down every last dime in order to go on Medicaid - leaving the other spouse broke.
Click to expand...
I had fairly recently thought about what our residence would cover if we both needed long term care. I'm guessing we could clear $600K from it - BUT that would only cover 2.5 years of both in LTC. Wow. It's sobering but YMMV.
 
Odduck said:
After staring at spreadsheets, FIRE, Flexible Retirement Planner, etc. I retired earlier this year and have been caring for my parents. They have a fair-sized nest egg, but it isn’t huge. We’ve discussed the possibility of moving them to an assisted care facility that could provide better care today and would be able to provide more care later on.

I’m having a hard time getting a clear figure of what their spending has been, but well, OK, maybe we can assume only certain costs remain for the next phase of life and then add them to the known costs of assisted care for both, assisted for one and nursing for the other or nursing care for one and memory care for the other… so many ways this could go. 75k/yr for assisted care, 175K/yr for assisted for one and nursing for the other. They have a long term care policy, but it isn't clear what it covers for assisted living unless you meet all the requirements for nursing care.

And then who knows how long they’ll live? When you’re looking at FIRE, etc. and figure a life span of 85-95 when you’re 60, that’s a fairly small range as these things go. The Social Security Administration actuarial tables show they both have around 5-6 years left on average. One has had strokes and heart attacks and is on great life-extending medications while the other has no life-conditions issues. So it could be 2 years and 4 years, or it could be 5 years and 10 years.

We met with their financial advisor who looked it all over and said they’re looking fine – they have more than lots of their clients, but umm, a plan? A graph? A confidence level? Monte Who?

Has anyone planned out the last years with elevated spending to figure the odds of making it?
Click to expand...
As others said, no way of easily narrowing it. So let us look at the available data.

1) According to CMS, 70% of seniors will need some kind of Ling Term care - be it in home aid, Assisted Living, nursing home, Dementia, or at the last hospice.

2) Cost of medical care grows about 6%/year.

3) Genworth;s Cost of Living survey (Cost of Long Term Care by State | Cost of Care Report) has decent data for various levels of medical assistance by state and sometimes by location also. This survey also projects (for those who are not in need today) the future cost.

4) LTCi industry made a mistake in calculating the longevity - instead of 68 average went to 77 years. And the cost kept going up. The LTCi industry's peak year was 2002 when 750,000 people purchased it. In 2018 the number went down drastically low of 57,000.
In 2002 there were 102 companies selling LTCi. In 2018 there were 14 major LTCi companies- Long Term Care Insurance Companies

5) Existing companies started raising the premium, lowered the benefits and increase the rejection rate.

6) most coverage are around $125K/year for 3 years between the couple, so if both are in need for LTC then they will have to pay a good chunk out of pocket.

7) Medicare does NOT pay for LTC, Medicaid does, but the reimbursement is low so the facilities cut the corners in services

My understanding is that you need a minimum of $1 million of assets to be able to afford LTC expenses.


We could not qualify because of wife's cancer and my diabetes but if we were qualified, it would have cost us close to $2,800/month for $125k between two of us - high cost, inadequate coverage.

SOLUTION:
Type - A, non-profit CCRC (Continued Care Retirement Community). CCRC provides independent living plus medical care when one needs it from assisted living, nursing home, Dementia, and Hospice (but rarely in home service) as part of your monthly service fee regardless of how long one needs it.

However, the cost of the medical care depends on the Type of CCRC. Type -A provides that as part of the fixed monthly service fee (with annual increase of inflation. Type B may provide separately at a discounted rate from the market price, Type C may provide at the market rate, etc.
CCRCs will rarely take you in if you did not pass the simple MOC test for Dementia. Dementia and Parkinson's patients are healthy and can live for 7-12 years but can not function normally. That long stay (vs. average 3 years of stay in a nursing home) is expensive!!!

Hence, go to a CCRC before you develop any neurological disease. Go to a Type-A, non-profit CCRC that is growing. Look for high occupancy rate - >90+, Fitch rating of A- or higher - both a necessity for financial stability to meet the actuarial projection.
Look at the US News and World report on CCRC - https://health.usnews.com/best-senior-living.

We live in Home which has earned batches of Best Independent Living, Best Assisted Living, Best CCRC and has been recognized by Pa State as number 1 in Nursing. It is rated number 3 out of some ~2,000 CCRCs in the USA and has a Fitch rating of A.

Our kids say that it is the best gift we gave them! If you want to talk me, send an email at jayanu at gmail.com.
 
jayanu said:
As others said, no way of easily narrowing it. So let us look at the available data.

1) According to CMS, 70% of seniors will need some kind of Ling Term care - be it in home aid, Assisted Living, nursing home, Dementia, or at the last hospice.

2) Cost of medical care grows about 6%/year.

3) Genworth;s Cost of Living survey (Cost of Long Term Care by State | Cost of Care Report) has decent data for various levels of medical assistance by state and sometimes by location also. This survey also projects (for those who are not in need today) the future cost.

4) LTCi industry made a mistake in calculating the longevity - instead of 68 average went to 77 years. And the cost kept going up. The LTCi industry's peak year was 2002 when 750,000 people purchased it. In 2018 the number went down drastically low of 57,000.
In 2002 there were 102 companies selling LTCi. In 2018 there were 14 major LTCi companies- Long Term Care Insurance Companies

5) Existing companies started raising the premium, lowered the benefits and increase the rejection rate.

6) most coverage are around $125K/year for 3 years between the couple, so if both are in need for LTC then they will have to pay a good chunk out of pocket.

7) Medicare does NOT pay for LTC, Medicaid does, but the reimbursement is low so the facilities cut the corners in services

My understanding is that you need a minimum of $1 million of assets to be able to afford LTC expenses.


We could not qualify because of wife's cancer and my diabetes but if we were qualified, it would have cost us close to $2,800/month for $125k between two of us - high cost, inadequate coverage.

SOLUTION:
Type - A, non-profit CCRC (Continued Care Retirement Community). CCRC provides independent living plus medical care when one needs it from assisted living, nursing home, Dementia, and Hospice (but rarely in home service) as part of your monthly service fee regardless of how long one needs it.

However, the cost of the medical care depends on the Type of CCRC. Type -A provides that as part of the fixed monthly service fee (with annual increase of inflation. Type B may provide separately at a discounted rate from the market price, Type C may provide at the market rate, etc.
CCRCs will rarely take you in if you did not pass the simple MOC test for Dementia. Dementia and Parkinson's patients are healthy and can live for 7-12 years but can not function normally. That long stay (vs. average 3 years of stay in a nursing home) is expensive!!!

Hence, go to a CCRC before you develop any neurological disease. Go to a Type-A, non-profit CCRC that is growing. Look for high occupancy rate - >90+, Fitch rating of A- or higher - both a necessity for financial stability to meet the actuarial projection.
Look at the US News and World report on CCRC - https://health.usnews.com/best-senior-living.

We live in Home which has earned batches of Best Independent Living, Best Assisted Living, Best CCRC and has been recognized by Pa State as number 1 in Nursing. It is rated number 3 out of some ~2,000 CCRCs in the USA and has a Fitch rating of A.

Our kids say that it is the best gift we gave them! If you want to talk me, send an email at jayanu at gmail.com.
Click to expand...
Thanks for the sites. The costs look even worse than I thought!:(
 
>> Thanks for the sites. The costs look even worse than I thought!:(

You are welcome. It is a sad situation that most people do not think about the medical costs in the retirement and don't have enough savings in the most powerful country in the world.

Most are unaware of what Medicare pays - https://www.medicare.gov/Pubs/pdf/11579-medicare-costs.pdf. Many want to stay at home and get care at home but do not know that Medicare pays only a little based on the needs and certification by medical professional - https://www.medicare.gov/Pubs/pdf/11579-medicare-costs.pdf.

And Medicare Trust Fund will spend more than the revenue by 2031 ! The Facts About Medicare Spending | KFF
(10,000 people retire every day - fewer workers, less payroll deduction - if AI reduces personnel then Medicare will also be negatively impacted).

If bi-partition work is done in the congress (currently, if ANY work is done in the congress!) then Medicare may be saved. On one side, AI may reduce workers (so negative impact on the Medicare since it depends on payroll taxes) and on other side we will need highly skilled workers (since retraining will be tough), and the immigration reform is languishing in the congress for a long time. Foreign student come, get higher degrees, and they go back due to the restriction on immigration and start new successful companies in the native countries.

The polarization of the country has been dragging the USA from the shining example of successful Capitalistic Democracy. Sad
Love
Jay Shah
 
We were very lucky with DM. Her assisted living facility was "only" $4,300/month and her SS was $1,500/month and Medigap was $350/month so assisted living wasn't a huge drag on her finances.
 
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