|5/9/2014 11:03:00 AM|
Saving a little can make a big difference
The finances of elder care
This is part of a series on senior living.
Catholic Sentinel file photo by Ed Langlois
Residents of Assumption Village in Portland play bingo.
|Tips for financing elder care|
|• Try to have at least $100,000 in the bank when it is time to move into assisted living.|
• Unless you are wealthy, make sure the facility you choose accepts spend-down and Medicare. That will keep you in place when your funds run out.
• Choose a place with a full span of care so you won’t need to move when your needs change.
• Favor saving for retirement over saving for kids’ college if you must make a choice. There are no scholarships for retirement.
Young adults and middle-age workers who set aside even as little as $50 per month for retirement will gain a golden-age advantage even beyond the sum.
That’s because retirement communities tend to hold on to residents who have spent down their earnings until Medicaid takes over. But there are few openings for seniors who apply for residence with only Medicaid from the start.
When you are hunting around for a place to live, make sure the facility accepts “spend-downs” and Medicaid, says Angela Boweter of Marian Estates, a retirement community in the small town of Sublimity.
“Not everyone can become self-made millionaires or collect an inheritance,” Boweter says. “How can you possibly save enough for all this? If they do not accept Medicaid, you will be evicted. What if the stock market crashes, health care costs or long term care insurance changes or all of your planning and saving doesn’t pan out? What’s the probability that you or your spouse ends up with atrociously high hospital bills? Things can happen, nobody knows the future. Will you be evicted after you have paid five thousand to ten thousand per month to a company for two, three maybe even ten years?”
It is good to have some savings since that will get seniors in the door. Boweter suggests $100,000 as a minimum.
The most economical setup at Marian Estates, for example, is a studio that goes for $2,600 per month. Add assisted living expenses to that base rent and monthly expenses surge to $3,800. Over five years, that adds up to about a quarter million dollars. And many places don’t have such good deals. The cost of five years can easily reach a half million dollars.
Many retirement facilities now offer a full range of care, from independent apartments to assisted living to nursing care. Boweter suggests that seniors choose a place like that to prevent traumatic and expensive moves.
Jim Schaller, a financial advisor and member of St. Ignatius Parish in Portland, says he sees many people whose cash lasts because they developed a plan. Planning includes taking stock of assets and entering a residence that will be affordable for the expected lifespan. He also suggests choosing a facility that accepts Medicaid if there is any uncertainty.
Schaller sees many people able to move smoothly into North Portland’s Assumption Village, for example, because they owned a home and sold it. That’s another common way to fund assisted living and nursing care.
He also sees seniors outlive their cash because they chose a residence that was too expensive. Often, the children start picking up the bill at the same time they are trying to put their own kids through college. It’s a painful situation.
Schaller, owner of St. Johns Tax Service, says few seniors want to spend all their money, because they want to leave some for heirs. But when that happens, Medicaid will kick in for assisted living and nursing care — if you have chosen a residence that accepts the federal medical insurance for the poor. Medicare, federal health insurance for elders, pays medical bills, but not the rent in general. Social Security benefits, by contrast, can be used for anything.
Long-term care insurance is another safety net. It starts paying living expenses once the policy holder needs nursing care. It does not cover independent senior living or assisted living.
Schaller, and all financial advisors say that workers should favor retirement savings over education savings, since there are other ways to fund college.
“For retirement, there are no scholarships, grants or loans,” Schaller says. “The only thing that comes close is Power Ball and that’s not going to happen.”
To middle-aged parents guilty about skimping on college savings, Schaller explains that having a retirement plan in place will help the children’s pocketbooks in the long run because they won’t have to step in.
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