The Longevity Risk of Extended Care Needs — What’s Your Plan?

By John Hillman, MBA, CFP®, ChFC®, CLU®, CLTC

Planning how you will make up for any potential shortfalls from reductions in Social Security and Medicare benefits is critical to minimizing longevity risk. My inaugural post for The Fiduciary Advisor went into some detail on this. Another key longevity risk factor to plan for is extended care. If there is at least some risk that you might live long enough to become frail or cognitively impaired — and therefore need the assistance of others to help you with the normal activities of daily living — please read on.

The family plan
With no plan in place for extended care, the healthy spouse typically becomes the caregiver. Since the need for care usually arises at an advanced age, the physical toll paid by the caregiver can be debilitating. If the spouse needs help with the caregiving job, the first place to look is other family members. But in many cases, children and their immediate families live far away. And having the patient move in with the children may put inordinate physical, emotional and financial stress on the next generation or two. The many challenges of this plan often lead a family to opt for hiring people to come into the home to care for the patient.

Hiring outside help
There are numerous potential strategies for dealing with the possibility of needing to hire outside help for extended care. At the lower end of the financial spectrum, they may involve creative ways of qualifying for Medicaid support. At the opposite extreme, they may involve structuring the portfolio in order to self-fund for any financial need. At all levels of the financial spectrum, planning for extended care should involve a thoughtful review of the options for care available in each potential situation and developing a plan for the provision of that care should the need arise.

Fiduciary financial planning takeaway
Not that everyone needs to purchase long-term care insurance. But without a plan in place for dealing with what may prove to be life’s final and most challenging risk, a family may find itself in crisis. The crisis may involve severe physical and emotional risks to the caregiver and other family members — or even devastating financial losses. Understand your longevity risk and the financial planning implications. If you don’t, it’s never too late to start. To learn more, read Planning for Extended Care or contact us to discuss possible next steps.

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