No generation gap … they’re all at home
By Don Kuehn
One of the first articles I ever wrote for the AFT dealt with the “sandwich generation”—those providing some financial support to a parent at the same time they are raising a minor child or supporting an adult child. According to the Pew Research Center 13 percent of the 75 million baby boomers are now in this situation; some estimates show that nearly two-thirds of baby boomers will be taking care of an elderly parent in the next decade. On top of that, seven to 10 million Americans are caring for their aging parents from a long distance away.
A 2009 study by the Sloan Center on Aging & Work showed that among older boomers—those turning 63 that year—one in seven provided regular care to a parent, for an average of 11 hours a week. Among younger boomers, 17 percent committed more than nine hours a week to parental care. In all, nearly three-quarters of all boomers and Gen-Xers had some level of responsibility for parental care. Twenty-eight percent of boomers also had some child care responsibilities.
The combination of child- and parent-care duties caused 3 percent of these caregivers to take early retirement, 6 percent to quit their jobs and 10 percent to cut their work hours to answer the needs of family members. Fortunately, the Family and Medical Leave Act provides as much as 12 weeks of unpaid time off for qualified workers to deal with immediate or family needs.
We all know that life is full of tough choices. The economy has yet to fully recover from the recession, job insecurity hangs over almost every household, and salaries and wages are not increasing the way they once did. But what’s a person to do? If mom needs your help, if your college-educated daughter needs a place to stay until she gets established in her new career, you step up.
One of the things that bothers me is that, even without the extra financial burden of kids who return home after college, teens who just have to have the latest in electronic devices or parents who need your help to stay in their own home or who may be forced to move in with you, most of us are falling way short of saving enough to fund our own retirement.
So how can you survive this squeeze? Carol Abaya, a syndicated columnist says the first thing to do is to make sure your parent(s) have all necessary legal documents in place. This includes a durable power of attorney, as well as a medical power of attorney (sometimes called a healthcare proxy) authorizing others to make medical decisions; a regular will; and, if appropriate, a living will (sometimes called an advance directive).
In my case, I took my parents to see a lawyer who specialized in elder issues and had him explain the benefits of transferring all of their (limited) assets into a living trust, with me being named as a co-trustee. That enabled me to handle all of their financial affairs, pay all of their bills (from 1,200 miles away) and manage their investments on their behalf—while they had the peace of mind of retaining ownership of everything.
Many experts, Abaya among them, advise against having a parent move into your house. Unless you have dedicated space that is engineered to accommodate the specific needs of the elderly (grab bars, no stairs, etc.) your parent may be better served in an assisted living facility or, if health conditions warrant, a long-term care facility. Many people have lingering negative feelings about such places, but today’s nursing homes or long-term care, skilled-care or assisted-living facilities can be a boon to the stressed adult who accepts the responsibility for parent care. Not only is there peace of mind knowing the resident is cared for on a 24-7-365 basis, but there are social, religious and physical activities as well as food services that are hard to duplicate in your own home.
I witnessed a tremendous change in the attitudes of both my parents when they finally came to the conclusion that a well-suited facility would make their lives easier. The place they settled on had graduated services: independent living, assisted living, long-term care and skilled nursing. As my father’s health deteriorated, they moved up the ladder. After my father died, we moved my mother to a similar facility closer to family.
You may be thinking that kind of care is expensive—and it is. Depending on the part of the country and the services provided, costs can range from $150 to more than $200 per day ($50,000 to well over $73,000 a year). One way to cover all or part of the cost is to investigate long-term care (LTC) insurance.
A good policy will cover special services such as physical, respiratory or speech therapy; will cover mental and nervous disorders like Alzheimer’s disease; home health aides; hospice care and private-duty nursing when confined to a facility.
Premiums for this kind of coverage don’t come cheap. As with most insurance, costs are driven by one’s age at the time of purchase: at 40 it’s about $875 a year; at 50 years of age under $1,200; at 60 years old roughly $1,850; and for someone 70 years old, the cost is more than $3,500 per year (depending on where you live and the options you choose such as waiting periods and the percentage of daily costs you want to insure).
Although premiums are high, in many states they are at least partly tax deductible and at the federal level, premiums apply toward the “floor” in determining qualified medical expenses.
My wife and I took out coverage before we turned 60, and our combined annual premiums run about $3,600. Our LTC policy has cost-of-living escalators that should keep us fairly close to the increases in the actual cost of the services we may need one day.
LTC insurance is not for everyone. If you have to cut out necessities to pay the premiums you should look for other solutions to this problem. You’ll be paying premiums for a very long time and, once set, those premiums won’t go down.
If you would easily qualify for Medicaid (the program for people with very limited assets and low incomes), you probably can’t afford the premiums and wouldn’t want to. My mother had to spend her assets down below $2,000 to qualify for Medicaid in Iowa. Once we had spent her assets down to that level by paying the monthly costs of her nursing home, Medicare Part D (prescription drugs), supplemental “medigap” insurance, along with other incidental expenses, she qualified for state assistance. And what a blessing that was!
On the other hand, if you have enough cash and investments to easily pay the costs yourself, you may want to “self-insure” for the costs of home healthcare, assisted living or long-term care. By some estimates, a nest egg of at least $2 million is a good starting point for covering the various LTC needs out-of-pocket.
As medical and environmental advances stretch our life expectancies, it’s not at all unusual to see Americans living well into their 80s and 90s and beyond. The chance that anyone will need long-term care at some point in their lives is more than 50 percent—greater than the risk of losing your home to a fire.
Most people will never be in a nursing home (more than 80 percent of long-term care is provided at home, in assisted living or even in adult day care) but over 40 percent of the people who need long-term care are between the ages of 18 and 64. They have fallen victim to accidents, injuries or debilitating illness (MS, brain tumors or strokes) and need help with the “activities of daily living” (feeding, dressing, toileting, bathing, taking medicines, etc.).
If the generation gap has closed because everyone lives at your house, remember, the Patient Protection and Affordable Care Act (“Obamacare” to some) lets adult children up to the age of 26 remain covered on their parents’ health insurance. That may take care of one part of your “sandwich.”
Medicare or Medicaid may help care for your elderly parents. Adding long-term care insurance might be another piece in the puzzle you’ll want to consider to protect your family’s assets.
After all, it’s your money and the life you envisioned in retirement could be jeopardized by that knock on the door when either your parents or your children show up looking for your help. Be ready.
Don Kuehn is a retired AFT senior national representative. For specific advice relative to your personal situation, consult competent legal, tax or financial counsel. Comments and questions can be sent to email@example.com.