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Peace of mind for golden years

Updated: May 3, 2013 12:14PM

Originally published: August 10, 2005

What is the greatest risk in your financial plan? Itís not another bear market. Itís the devastating cost of long-term care.

Do your parents and in-laws have enough money to pay for their own care for years to come, or will you be asked to supplement their long-term care needs just when your own children are in col-lege and you are trying to save for your own retirement?

Will government programs be able to care for baby boomers in their old age? Not if history is any example. Remember how crowded the public schools were in the 1950s and 1960s? Remember the temporary classrooms in trailers? Thatís what state-provided nursing care for seniors could look like in 20 years.

If we depend on our savings to fund the possible need for long-term care, we court the risk of running out of money. If we depend on our families, we pass on an incredible burden to our children.

You can plan ahead, or you can take your chances.

Planning ahead involves purchasing insurance to cover the cost of long-term care.

Itís a common misconception that Medicare, supplemental poli-cies or some other government program will pay for all the costs of care as we age. Medicare pays only for a limited number of days of skilled nursing care after hospitalization. It does not pay for long-term custodial care. Medicare supplement policies do not cover this type of custodial care at all. State Medicaid plans for the impoverished do cover custodial care, but only after most assets have been used up, and primarily in facilities where you would least want to spend your last days.

Some seniors and their families mistakenly plan to become impoverished so the state can take over their custodial care while children inherit their savings.

Thatís a tragic mistake. Relying on state Medicaid programs limits choice and practically guarantees that youíll be forced into a state-funded facility.

The answer is long-term-care insurance. It covers stuff we donít like to think about for our parents, much less ourselves: the need for assistance in managing the daily activities of living in our later years ó bathing, dressing or even feeding ourselves.

If you canít stand the thought of ever needing this kind of care, take a different perspective. Tell yourself that youíre buying long-term-care insurance to give yourself peace of mind during your retirement years.

When you own a long-term-care insurance policy, you can live the retirement lifestyle youíve planned without worrying about extended health-care expenses being a burden on your spouse or your family.

Nursing home care shouldnít be your only option. You can have a range of choices if you have the money to pay for them. You might start with daily or twice-weekly visits from a home health care aide. Or perhaps you want to move into an assisted-living facility.

Years later, you might require the 24-hour assistance that only a nursing facility can provide. So donít make the mistake of calling long-term-care insurance by its old name: nursing home insurance. Your policy should cover a range of options and keep you from being forced into a nursing home except as a last resort.

Bringing up the subject of long-term-care insurance might reveal a huge generation gap in your family. Itís possible that your parents donít know how the concept has changed in recent years ó from coverage that used to force older people into a nursing home to todayís policies that pay for home health care as needed. And if you are buying a policy for yourself, it might be helpful to explain to your children that youíre making plans not to burden them.

If your parents wonít consider, or canít afford, such a policy, adult children in the family should think about joining together to make the cost of the annual premium a gift for their birthdays, Christmas or Motherís and Fatherís days. Theyíll think youíre being generous, and you are. But itís also a hedge against your spending your own retirement dollars to care for the people who once cared for you.

Having insurance coverage lifts the financial burden of caregiving and ensures that caregivers can accumulate assets to provide for their own future care.

Needing care when youíre older is a nagging worry for women who donít have insurance to cover the costs. While 88 percent of men say their spouse will take care of them if they become ill or disabled, only 72 percent of women figure their spouse will be able to care for them. Futurist Ken Dychtwald projects that todayís American woman will spend more years caring for aging family members than she did caring for her own children! What ó and who ó will be left to care for the widow or single woman? The fear of becoming a bag lady is not unfounded. Thatís why long-term-care insurance is a must for women.

What if you never need help with the daily activities of living? Why complain if you never use your long-term-care policy?

Excerpted from The Savage Number: How Much Money Do You Need To Retire? (256 pages, Wiley, $24.95) by Terry Savage, whose column appears every Monday in the Chicago Sun-Times Business section. Savage is a registered investment adviser, and appears weekly on WMAQ-Channel 5’s newscasts. She can be reached at

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