If you are retired or looking to retire anytime soon, you will be among the 10,000 individuals who reach age 65 every day and look forward to their time in retirement.
In retirement, most people hope to relax, travel, spend time with family and loved ones, write, learn new skills and otherwise enjoy the fruits of a lifetime of labor.
However, there is a darker side to retirement. Associating aging with dysfunction, the deeper a retiree goes into retirement, the more the retiree fears the future. Among the darkest fears retirees harbor are: 1. being forced into an institutional care setting; 2. running out of money; and/or 3. becoming a burden on others.
These are well-founded fears. Though an overwhelmingly large number of Americans hope to live out their lives in their own home, studies show that less than 20 percent will realize that hope. Most will take their last breath in some variation of an institutional care setting and, in the process, will become a burden on loved ones while having spent some or all of the retirement nest egg paying for uncovered long-term care costs.
Not only do families suffer in the process, age-related dysfunction wreaks financial havoc on us as a nation. It is estimated that uncompensated family care-giving amounts to about $470 billion each year. At the same time, the financial cost to the public benefit programs that address medical benefits, Medicare and Medicaid amount to approximately $1.191 trillion, about 24 percent of the total federal budget, not counting related VA expenditures. The public costs have never been higher and are only expected to grow as more boomers enter retirement over the next few years.
Retirement nightmares one would hope never to have to deal with invariably start out as a health crisis of some sort: an acute illness such as heart attack, stroke, cancer or similar condition; or a chronic illness such as Parkinson’s, Alzheimer’s, muscular dystrophy or similar infirmity.
Whether acute or chronic, once a person is rendered incapacitated, assistance with activities of daily living will likely be needed at the hands of others, which will immediately turn the health episode into a financial issue, particularly for those without long-term care insurance, because our health insurance system (Medicare included) does not cover long-term care costs in any meaningful way.
Means-tested benefit programs like Medicaid and VA that do cover long-term care costs are complicated to understand, difficult to qualify for and not well understood or planned for, though with proper legal planning a retiree can access the benefits without losing all assets in the process, turning this into a legal issue. Furthermore, if the care needs place a person outside of his/her home, it will turn the medical episode into a housing issue.
Regardless of where the care is accessed, inevitably all of the family members and loved ones will find themselves implicated no matter how much the retiree hoped not to become a burden on others.
The fear of this scenario playing out in a retiree’s life keeps more retirees up at night despite them having anticipated and planned for retirement for a number of years, if not a lifetime. However, traditional retirement planning is fragmented and ineffective in being able to adequately address the three fears of most retirees.
Here is what traditional retirement planning looks like for the average person. Generally, planning around health issues amounts to ensuring access to health care through the purchase of a health insurance policy. From a housing perspective, an overwhelmingly large majority of retirees choose to age in place with little planning to ensure that outcome.
In traditional planning, the greatest amount of effort is devoted to financial planning — the focus being on saving and investing. Finally, retirees who engage in legal planning will focus on executing certain legal documents: a will or trust to set out who will inherit the assets upon death; powers of attorney to legally empower loved ones to manage affairs in case of incapacity; and living wills to set out desires regarding the use of artificial means of life support.
If the retiree seeks professional help with planning their health, housing, financial and/or legal affairs in retirement, one will assuredly deal with different professionals — insurance agents, health care providers, realtors, financial planners and estate-planning attorneys — who will not coordinate their individual planning efforts with each other even though, in the end, a health issue will turn into a housing issue, a financial issue, a legal issue and will always be a family issue —something that only becomes clear in hindsight after illness strikes. At the planning stages, however, most retirees do not see the connection between the different professionals they rely on for counsel, and neither do the professionals.
In my experience as a family member of an incapacitated parent who followed the traditional planning route described here, and as an elder law attorney who has, for over a decade, helped thousands of clients in similar situations through coordinated planning, I have come to the conclusion that uncoordinated planning will prove disastrous for retirees facing incapacity, leaving most engaging in traditional planning with a false sense of security. I came to this conclusion watching my father-in-law, Bill Wallace, live his last seven-plus years in a nursing home due to Alzheimer’s-related incapacities. In the process, the family ran out of money and turned to Medicaid for help with ongoing care costs when it would have been less expensive to hire the help at home. All efforts to bring Bill out of the nursing home proved futile. Working through the process with the various medical, legal, financial and housing agencies and agents, it was very apparent that the odds were stacked against the possibility of caring for Bill at home. This is what inspired me to enroll in law school to better understand the legal framework of our system that leads to such outcomes. After graduating from law school, I have devoted the last 14 years to develop a model that aims at eliminating the weaknesses of traditional planning methodology. It is a coordinated multi-disciplinary retirement planning process that goes beyond traditional legal planning, recognizing that proper planning requires coordination of planning efforts around health, housing, finance and legal affairs that must be accepted and understood by all family members who will play a role in an aging loved one’s life.
At the end of the day, the current paradigm of retirement planning must change to accommodate the daily increase of retirees. The prevailing system of retirement planning will not meet the needs of the baby boomers and their aging parents. A change must occur, and that change should take the form of a system of planning that encompasses all areas of retirement. This system offers a sense of peace and predictability to those that complete the process.
To submit questions about issues that retirees commonly face in retirement, go to http://www.agingoptions.com/ask-a-professional/, or call 253-838-3454 and leave your question there. You can also write to 31919 Sixth Ave. S., Federal Way, WA 98003. We will answer questions in the order received.
Elder law attorney Rajiv Nagaich has served the greater Puget Sound community for the last 14 years as an advocate devoted to surpassing the boundaries of traditional retirement planning. He is currently pursuing his PhD in multidisciplinary retirement strategies.
