First, I appreciate all the retirement scenarios shared here – they are very useful!
But I wonder the difficult question of what happens if someone runs out of money at the end of their life?
For example, my parents are rounding the corner of life where they need a lot more care. They have good resources, advisors and have made a good plan by living in a progressive retirement community. But what if they both require skilled nursing (a $ 10,000 bill each month, with $ 6,000 each coming from savings after retirement, social security, and long-term care are added to the bill). Now suppose they both live for 10 more years in that environment (which is awful to think about). This would deplete all of their resources, no matter how carefully invested.
So what happens when someone runs out of money to maintain their room and diet? Is Medicaid coming in? Are other programs getting started? Would homelessness be likely? In their case, there is a charitable aspect to the facility they are at, so it is less of an actual concern for them.
But for anyone who may not benefit from charity, what happens in this scenario? Anyone who reads your collective advice probably has good intentions of saving up to make their retirement comfortable. What about this worst case scenario when resources are depleted – so what?
You are asking really important questions.
The idea of running out of money in retirement, especially at a vulnerable time in one’s life, is one great concern too many Americans – and with good reason. Retirement is an expensive time, especially considering health care and long-term needs, and retirees typically live on a fixed income. Depending on how much they have saved, they may have enough to survive the rest of their lives, or they may scrape to make ends meet.
It makes so much sense why individuals and their families, like you, would worry about paying for nursing homes, nursing homes, and other retirement communities during this time. Long-term care is not cheap.
I start with the good news. In a situation like the one you mentioned, homelessness is not very likely, said Karen Heider, a senior wealth advisor at Concenture Wealth Management.
There are a few ways to handle this type of situation, though it will come down to a few factors, including the benefits to the state and the facility. And this presupposes that the person has already used all his assets, has sold the primary residence and does not have long-term care insurance, Heider said.
Check out MarketWatch’s column “Retirement Hacks” for useful advice for your own retirement savings journey
A family member may step in to help pay the bills, but this is not always possible. There are charitable opportunities that you mentioned your parents have where they live, but it is not always available either. Medicare does not cover much in long-term care situations unless it is short-lived after a hospital stay. Here is more information about Medicare and long-term care from AARP.
Once all of these routes have been explored, the next option may be to move to another facility where they will be eligible to receive benefits.
“The more likely scenario is to have to move from one facility to another to ensure Medicaid benefits are accepted there,” Heider said. “Some facilities accept a limited number of people through Medicaid, so finding availability may also be a reason to have to relocate facilities.”
The process can seem daunting. Individuals or their family members, if they are lucky enough to have them to help, may feel like they are on the phone for days and call their Medicaid representatives and local facilities to see what benefits they are entitled to how the application works (or how long it would take) and even if there are some vacancies to start. There may be an attorney at the current facility who can help find information about transfers.
There are various plans available under Medicaid that you may know so coverage will vary and it is important to get explicitly clear information about what options are available and what deadlines need to be met. The process can take weeks or months, so it is best to jump on this sooner rather than later.
Here is more information about recipient resources from Medicaid.gov. Individuals should also contact their state’s Medicaid office. Veterans can also find useful resources through the Department of Veterans Affairs, such as possible long-term care facilities. Look for local aging agencies that may be public or private nonprofits in your area that focus on the needs of the elderly.
Remember, facilities can try to pressure a non-paying resident to leave, said David Bize, a certified financial planner at First Allied. State laws vary as to how facilities can handle this situation. “The bottom line is whether you want to go through the hassle of fighting / suing the facility and potentially losing a lawsuit with additional costs,” he said. “Ask, ask and ask of course in advance and get it in writing so you know what to expect and no surprises.”
In addition, families may want to consult an attorney who specializes in Medicaid “crisis planning” to navigate the potentially complicated rules surrounding these benefits.
For readers who are worried that they may fall into this scenario one day, planning is key. Investigate further long-term care insurance, which may resemble independent policies or be a hybrid model in life insurance. Think years in advance about what type of care you want to receive in your old age, and where or by whom – then start estimating how much it will cost for that care (and also take inflation into account).
And remember, this is a problem that can affect anyone. About a quarter of today’s 65-year-olds want one “badly needed” for long-term care, and a further 38% will require “moderate need,” found the Center for Retirement Research at Boston College. Only one-fifth of 65-year-old Americans do not need any long-term care, according to the study.
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