Memory Loss Looms Large in Retirement Planning

Read Time: 4:44
Published: Sep 29th, 2016
Memory Loss Looms Large in Retirement Planning
Article Updated:October 20th, 2020

Planning for retirement should be high on your priority list. Contributing money to your employer's 401(k) plan, if available, is priority one, according to most experts. Additionally, some people will contribute to an IRA as well. 

Some people have an employer that offers a defined pension. No matter, we all work hard now so we can have an enjoyable and long retirement. With life expectancy increasing, it becomes even more critical to not only put away money for your 'golden years' but to protect your retirement savings as well.

You want to have enough income and savings in retirement to maintain your lifestyle. However, as we get older, we face health challenges, including Alzheimer's and dementia, which can dramatically change your future retirement's financial dynamics. 

One of the biggest risks to our retirement savings is long-term health care costs. Not having a plan for the financial costs and burdens of aging can be the single biggest devastator of a financial plan. 

Long-Term Care is Both a Cash Flow Issue and Family Issue

The consequences of long-term care are both a cash flow issue and a family issue. Family members are often forced into the role of being a caregiver when no advance plan exists. The family goes into crisis mode. Yet, too many people ignore the problem until it becomes a crisis.

The financial costs and burdens of long-term care will impact your income, savings, lifestyle, and legacy. You and your spouse are directly impacted, but your family faces many challenges when you fail to plan.  

People require long-term health care due to illnesses, accidents, and the impact of aging. As you get older, memory loss looms large.

The Alzheimer's Association says 1 in 3 seniors will die with some form of Alzheimer's or dementia. In 2019, more than 16 million caregivers in the U.S. provided 18.6 billion hours of unpaid care. This care's estimated value is worth around $244 billion for people with Alzheimer's disease or other dementias. Plus, this is the impact of care due to cognitive decline.

The consequences of family caregiving happen since many people don't have enough or exhaust their savings requiring a spouse or family member to become a caregiver. The burden on these unpaid caregivers is physical, emotional, and financial. Usually, this care is provided by a daughter or daughter-in-law. This 'Sandwich Generation' is burdened as they are working and raising a family while dealing with long-term care for their Mom or Dad.

The average worker who takes time off to provide care for an aging parent sacrifices more than $300,000 in lost wages and benefits over a lifetime, says Sandra Timmermann, a gerontologist, and director of the MetLife Mature Market Institute, as quoted in Kiplinger's.

“You lose the accumulation of the money you could earn; you lose your 401(k) match; you lose your benefits and health insurance; and you may not be able to find a job again when you want to get back into the workforce.” 

Sandra Timmermann, a gerontologist

An AARP survey said 55% of these caregivers admitted to being overwhelmed. That same survey said 68% used some of their own money to help provide care, and 39% said they became financially strained due to taking time off work, family leave, or other issues.

Long-Term Care Insurance Risk Increases with Age

The U.S. Department of Health and Human Services says there is over a 50% chance you will need help with at least two activities-of-daily-living or need supervision due to memory loss. Knowing these facts having a plan that addresses this risk is key to a balanced retirement plan.

Merrill Lynch suggests purchasing Long-Term Care Insurance in order to protect assets and avoid placing your children from becoming part of the 'Sandwich Generation' dilemma. They say to keep in mind that it costs less to buy Long-Term Care Insurance when you're younger since premiums are based on age and health at the time of application. You must enjoy reasonably good health to obtain coverage, and your health is always better when you are younger. 

In fact, most people purchasing LTC insurance are doing so as part of their retirement planning. Once you have substantial health issues, it is probably too late to plan. However, every insurance company has its own underwriting rules, so be sure to speak with a specialist who understands each company's rules.

About 5.8 million Americans are living with Alzheimer's disease, according to the Alzheimer's Association. Without the development of medical breakthroughs that prevent, slow, or stop the disease, by 2050, the number of people with Alzheimer's disease could reach 13.8 million. Other estimates suggest that number could be high as 16 million. 

Long-Term Health Care is Expensive - Alzheimer's Care Even More

Out‐of‐pocket spending continues to increase for the care required for those who have Alzheimer's and other types of dementia. This care cost is expected to run $66 billion in 2020 or 22% of total payments. Medicareand Medicaid will cover $206 billion, or 67%, of the total health care and long‐term care payments for people with Alzheimer's or other dementias. Medicareonly pays a limited amount of skilled care associated with memory care. Only Long-Term Care Insurance will pay for all types of long-term care associated with any type of dementia.

The American Association for Long-Term Care Insurance (AALTCI) says in 2019, LTC Insurance paid over $11 billion in just one year in claims, many of those due to memory loss. That number will also climb as people with LTC Insurance policies get older.

Experts suggest seeking the help of a specialist in Long-Term Care Insurance to make sure you have the correct benefits and pricing based on your age and health.

About the Author

An LTC News author focusing on long-term care and aging.

Editor's Note

Your body, health, and mind will change in the next 20+ years. Consider the physical, emotional, and financial burdens placed on you and your loved ones as you get older.

LTC Planning Resources

LTC NEWS offers an abundance of resources to learn about your options and decide which long-term care solution is best for you. However, these solutions are all medically underwritten, so you can't delay until you have major health problems. It would be best if you planned when you still enjoy reasonably good health. The underwriting rules vary between insurance companies. Many experts suggest starting your research in your 40s or 50s. 

Use the LTC NEWS Cost of Care Calculator and find both the current and future cost of care services where you live. Click here and see the financial impact. 

Caregiving is hard on family members, and paid care is expensive. Affordable Long-Term Care Insurance provides the tax-free resources to pay for your choice of quality care in your home or in a facility.

Seek a LTC Insurance Specialist

Be sure to seek the right type of professional help. Experts say to avoid using a financial advisor or general insurance agent. They often lack the experience and knowledge in policy features, underwriting, tax advantages, and other factors. Since premiums can vary by over 100% between insurance companies, you need a skilled and trusted professional.

A qualified Long-Term Care Insurance specialist will help you navigate the options and find the best coverage at the best value. Discover your trusted pro by clicking here.

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LTC News Contributor James Kelly
James Kelly

Contributor Since
August 21st, 2017

LTC News author focusing on long-term care and aging.

About the Author

LTC News author focusing on long-term care and aging.

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