Based on my limited experience, anecdotal evidence and the emphasis on investments in the advisory business, I believe there is a huge unaddressed elephant in the retirement planning room—the life-changing stresses and unexpected and hugely expensive costs that often come with end-of-life and sudden major medical issues affecting oneself, one’s spouse or one’s parents. Let’s call it the “care bomb.”
My experience with the issue comes from completing two formal financial plans. One was done by a financial advisor using one of the most widely available software tools in the advisory business. The other I did myself with more sophisticated planning software. Both predicted that my wife and I wouldn’t run out of money even if we lived into our late 90s. While that’s comforting, neither tool (nor our advisor) addressed the care-bomb challenge.
Most individuals and advisors ignore, minimize or don’t realize the challenge’s impact. Retirees considered “underspenders” by their advisors, who assure their clients that it’s safe for them to open their purse strings and enjoy life, may be reluctant to do so out of some level of awareness of the challenge and anxiety about the possibility of running out of money.
Unless you can find a reliable fortune teller, there is no way to plan precisely for the challenge, which can wreak havoc on a financial plan. But talking about it more openly helps, even if the subject of strokes, falls, Alzheimer’s disease and end-of-life care is depressing, since developing even a broad-brush plan can be helpful.
The way my wife and I have approached planning for our end-of-life and “surprise” aging-related expenses—by having long-term care insurance, downsizing early and living near a child—has been informed by the experiences of our parents, who were of modest means.
My parents had been living in a sprawling and decidedly non-luxurious condo community in South Florida for about 15 years when my father died at age 89, after about six months of mental decline and a month in a nursing home. My mother, then in her mid-80s, no longer drove and used a cane for stability, so she couldn’t safely live alone. We moved her back to New York to an independent living facility run by an adjacent nursing home. The monthly cost for her small apartment, which included breakfast and dinner daily, plus housekeeping and laundry, was about eight times the maintenance on my parents’ condo, but not too much more than what rent and living costs would have been in an apartment near us, where she would have been isolated and lonely since my wife and I were working full-time. In the beginning, we covered her rent with the condo sale proceeds and then drew down her remaining savings, most of which had come from the sale of their small house in Brooklyn.
Five years into her happy stay there, we got a call one morning saying that she had fallen during the night and was taken to the hospital, where she was diagnosed with a broken hip. Rehab followed, but now she was wheelchair bound and could no longer live independently. Fortunately, the nursing home that ran the independent living facility accepted her as a Medicaid patient after I filled out a voluminous application form because her savings were almost depleted. She lived there for five years. Had she not fallen, we would have been paying her monthly living expenses, about $4,500 a month.
My in-laws’ story was different. They sold their house and bought an apartment in our town in 1991, when my mother-in-law retired at 66 and my father-in-law was 71. After a few years, he developed heart and circulatory problems and passed away after a short hospital stay at age 76. My mother-in-law continued to work part-time for many years, which she enjoyed, and which helped supplement her Social Security benefits and a small civil-service pension. She slowed down somewhat after she stopped driving at 80, but remained largely independent and with it until she was about 90, when my wife and I took over shopping and bill-paying, which we covered to supplement her modest income. At 95, she became increasingly forgetful and required a live-in aide, whom we found through a friendly and very reliable aide who worked in our apartment building. (When we sold our house, we moved to an apartment across the street from my mother-in-law, to make looking after her easier.) We used my mother-in-law’s modest savings to pay for the aide and her weekend replacement. We also continued to pay all the now greater household expenses. About three months into this arrangement, the person who cleaned my mother-in-law’s apartment said she found a weird glass tube in the bathroom. Turns out, as her son, a police officer, told her, the tube was a crack pipe the weekend aide had been using.
Just as my wife and I were trying to figure out what to do, we got a call from aide No. 1 saying that Mom had fallen overnight, was now sitting in the living room, and was more or less OK. We rushed over and saw that she was far less than OK and called an ambulance. Doctors at the hospital said she had fractured her pelvis. Unable to walk, we found a bed for her at a rehab facility/nursing home that my wife’s uncle had used.
Forced to quickly choose between outfitting her apartment for at-home care with a higher level of 24/7 help or opting for nursing home care, which cost roughly $18,000 a month, we opted for the latter. We put her apartment on the market, which involved two solid weeks of cleaning, straightening and moving out all her clothes and personal items. Luckily, the condo sold quickly, and we could use the proceeds to pay for the nursing home. My mother-in-law lived there for seven months and passed away at the age of 97.
My wife and I were blessed to have our mothers with us for so long. We were also very fortunate that their end-of-life expenses and arrangements worked out in manageable ways for us financially and otherwise. But that’s not the case for many other people. I venture to say that when most people get the “your mother fell” call, they don’t know what to do first.
Financial advisors can play an essential role in helping at such critical times, and not just with all-important monetary issues. One service that advisors should seriously look into is bQuest, which I was introduced to at WealthManagement EDGE by my fintech guru friend Davis Janowski. In writing about bQuest’s launch last month, in which he related a story about his mother’s sudden health problems, Davis explained how the firm’s platform allows RIAs to connect their clients to a curated national network of care providers specializing in aging-related issues. Providers include care managers, in-home caregivers, elder law attorneys, grief counselors, hospice professionals and home modification specialists who can install stair lifts and wheelchair ramps, for example—through an easy-to-use digital interface.
Since talking about these matters isn’t easy, bQuest also offers on-demand learning and decision-making guides for clients and advisors, as well as marketing support, with content including webcasts and other resources that help advisors explain and promote the services. I spoke with bQuest co-founders Lauren Clough and Kelly Baird at the conference. To be prepared for what may be the most traumatic times in your clients’ lives, you should too.
Comments, observations, suggestions? Please email [email protected]
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