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A Closer Look at Retirement Savings Statistics

A Closer Look at Retirement Savings Statistics

It is all over the media that nearly half of Americans aged 55 and older have no retirement savings in an individual retirement account (IRA) or 401(k) according to the federal Government Accountability Office (GAO). Also, while two out of five households do have a defined benefit plan (traditional pension), a full 29 percent of older Americans have nothing saved for retirement in any of these financial retirement tools. Retirement statistics have wide-ranging implications for the economic well being of aging baby boomers. But are the numbers being interpreted accurately? Contributing Forbes Magazine writer Andrew Biggs, who works on retirement policy, public sector pay and other economic issues facing Americans, says that the claim is factually incorrect. Furthermore, he feels how the media will cover the statistics and interpreted by politicians will continue to distort the facts. 

According to FactCheck.org, the statistic the GAO uses is derived from the Federals Reserve’s Survey of Consumer Finances. This survey excludes those Americans who only have a traditional pension. While that may seem a small exclusion, it significantly changes the retirement savings statistic and forward trends for aging Americans’ retirement economic health. When both traditional pensions and retirement accounts are included, a full 72 percent of households aged 55 or more have retirement savings. In 1989 the same analysis criteria indicated only 64 percent of households had retirement income set aside. Therefore there is a net gain over time of 8 percent since 1989 and about 24 percent better than when looking at current statistics that only include an IRA and 401(k) as retirement savings.

If the statistics look much better when traditional pensions are included, why does the Federal Reserve exclude projected pension income in retirement forecast data? Traditional employer-sponsored pensions have fallen off dramatically for several decades. More often, employers are likely to contribute to a personal employee retirement plan like a 401(k). This makes good business sense for private corporations that only have to match or contribute half of an employee’s contribution and avoids the long term financial planning for employee pensions; in particular indexed pensions which progressively increase in value in an attempt to address inflation and the cost of living. The private sector has been bailing out of the responsibility of individual retired workers pensions for some time and for viable economic reasons.

Meanwhile, America’s public sector job pensions are at risk of becoming too expensive for municipalities, states, and even the federal government to guarantee. Cuts in future public sector pension benefits have become common for civil servants, and the reason is the same as for the private sector, cost. Underfunded and unfunded pensions are becoming the norm, which calls into question the reliability of pension plans themselves.

Retirement security is a serious and significant national issue that typically does not get enough thoughtful analysis. Attention-grabbing headlines can distort truths, but even in its best light, many retiring Americans are at significant risk for economic hardship as people are living longer than ever before. It is widely recommended that a retirement plan make provisions for 30 years and with dementia cases on the rise many of those 30 years for a retiree may become very expensive if it includes dementia care. Many retirees plan to rely heavily on their social security benefits check. The notion that social security benefits will be the social safety net promised is also at risk. Much like pensions, the promise of full benefit payment is now at risk to individuals and many retirees are projected to receive only 77 percent of their promised social security benefit payments according to the Social Security Administration’s (SSA) own admission. 

The truth about retirement savings is as individual as you are. These overall projections can be both frightening and distorted with regards to your personal retirement experience. If you are 55 or older and still working, you have the control to make different and better decisions. Any proactive planning for your future retirement is better than abdicating responsibility to private firms and public employment sectors who may have mismanaged your retirement savings. 

If we can be of assistance, please don’t hesitate to contact us by calling us at 1.800.660.7564 or be emailing us at info@covertlaw.com.

Make Sure Your Wishes Are Carried Out

Make Sure Your Wishes are Carried Out

The importance of making end of life preparations cannot be stressed enough. Many put off making these plans thinking there is always time. The sad reality is that none of us are guaranteed time. Others may be bothered by the thought of death itself and allow this to paralyze them when it comes to making plans and getting their affairs in order for the end of life. However, most of these same people have wishes and thoughts about where and to whom their assets are distributed. Many of them also have ideas about what they do and do not wish to have happen when their life ends. Lack of preparation and planning means that these wishes likely will not be honored. In addition, it causes additional strain and stress on the people who are left to sort out the affairs. An example of this is the story of Debbie.

Debbie was a teacher who had been retired for several years. She was aging alone. She never married and had no family around. She did have a small circle of friends. After retirement, Debbie’s health progressively declined and she had more and more difficulty caring for herself. After a few years, Debbie passed away in her home.

Previously, she had conversations with a handful of her friends telling them her wishes for the possessions and assets she had. Because of these conversations, these friends each thought she had made the proper preparations to ensure these wishes would be followed. Unfortunately, Debbie had none of the necessary end of life documents that would allow her wishes to be followed. Her friends were left to try to piece together a puzzle that only many missing pieces. Her burial was prolonged and what she did have after paying expenses to settle the estate and bury her will not end up where Debbie wanted. This scenario can, however, be avoided.

If you or your elderly loved one have not made end of life preparations, make time to do so as quickly as possible. An elder law attorney can help guide you in what you should be doing, and can make sure the proper documents are in place to carry out your wishes regarding your health, care you want (or don’t want) to receive, and who should receive your money and possessions.

The first key document to be sure you have is a will or a living trust. A will allows you to specify where your money and possessions should go upon your passing. It also allows you to choose an executor of the estate. The executor will take care of managing the estate, paying debts, and distributing property as specified. A will only takes effect upon your death.

A living trust does everything a will can do, but also allows for you to choose someone to manage your assets if you become incapacitated because it is effective during your lifetime. A living trust also provides privacy, as it is not subject to court proceedings that become open to the public like a will is. There are numerous other advantages to a living trust that can be explored with the help of an attorney.

A living will and health care power of attorney are two additional documents that take effect while you are alive. A living will specifies your wishes for end-of-life medical care. For example, you can specify whether you want to be kept alive by artificial means if you are in a terminal state. A health care power of attorney provides for someone to make health care decisions for you, in case you aren’t able to make decisions yourself. Both of these documents outline your wishes about medical treatment and care when you can’t make them for yourself, so it’s important to seek legal guidance to make sure these documents are drafted properly.

A financial power of attorney should be in the plan as well. A financial power of attorney names an agent to handle your finances in the event you are no longer able to.  An agent can open and close bank accounts, write checks, and sell property if you choose to allow them the authority to do so. Like the health care power of attorney, the financial power of attorney should be created with legal advice to make sure your wishes regarding your finances are properly documented.

Having an estate plan is necessary for you to have a say in what happens if you become sick and cannot make decisions for yourself, and to determine what happens with your money and your belongings after death. An estate plan also helps those who are left to deal with the estate to do so in a more simple and straightforward manner.

If you have any questions about something you have read or would like additional information, please feel free to contact us by calling 1.800.660.7564 or by emailing us at info@covertlaw.com.

The Changing Landscape of Memory Care

The Changing Landscape of Memory Care

 Projected demographics indicate that memory care is about to become a booming market of opportunity for facilities and their construction that tend to developing specialized memory care needs. While some facilities are stand-alone solutions for memory care patients, others will offer care that is already integrated into existing facilities that cover more than just the memory care sector. Lisa McCracken, senior vice president of senior living research and development at Ziegler says “With the projected increases in individuals who have cognitive impairments, and the decreasing number of caregivers, we do not expect that this pattern will go away anytime soon.”

 Some of the fundamental changes include inventive care settings that are vastly different than existing dementia support floors and secure units. Some of the care settings have not yet been realized as research and understanding of cognitive impairment continues forward. The fact is there will be a broader array of options to choose from in the near future. The “small house” model is becoming increasingly popular. The small house model is an intimate setting within existing nursing communities consisting of 10 enclosed, secure units and is designed for couples facing memory challenges. A small scale affordable housing model partially funded by the Department of Housing and Urban Development (HUD) is typically available to low-income seniors.

 Those seniors who can afford private pay for their memory care are being aided by assisted living facilities that design dementia care units like a neighborhood from an earlier time in the patient’s life. Often, dementia patients readily recall memories from long ago and these centers, designed to look like a community, are replete with porches, rocking chairs, carpet that mimics grass, and a fiber optic ceiling that allows transitional lighting creating a sense of the day and night sky. Other elements like aromatherapy can aide in calming residents or stimulating appetite depending on the selection of oils integrated into the therapy. All of these elements help reduce anger, anxiety, and depression which are hallmarks of seniors who suffer from dementia illnesses.

 

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Full continuum care is improving as it meets the increasing numbers of its resident base with memory care issues. Many facilities are tapping into the expertise of geriatric psychiatry“  … also known as geropsychiatry, psychogeriatrics or psychiatry of old age is a subspecialty of psychiatry dealing with the study, prevention, and treatment of mental disorders in humans with old age.”  This field of study can enhance a memory care facility and improve the problems of anger, depression, and anxiety with medical components that address dementia. The techniques include a person-centered approach focusing on fostering autonomy, developing empathy with residents and even focusing on humor to help alleviate stress and increase the quality of life.  

 Professional caregivers will receive specialization in treating resident with dementia. Formal memory care education will become a more commonplace accreditation as the numbers of patients in need continue to increase. Rather than a certified nursing assistant (CNA) dementia patients will be tended to more frequently by certified dementia care nursing assistants (CDNAs). This change in credentialing will be driven by rising consumer expectation as well as tighter regulations that govern memory care. 

 Dementia illness is more prevalent than ever before, and so is the understanding that the disease has a long preclinical phase. Intervention and healthy lifestyle modification can continue to delay the onset of dementia in its clinical phase. Physical activity, social engagement, and brain fitness through smart devices and computer applications are wonderful cognitive compensation strategies that protect executive brain function, particularly in the preclinical phase of the disease. Beyond the known technology that already aides in the staving off of dementia, new cutting edge work can also help seniors compensate for memory loss allowing them to remain at home longer as well as enable senior facility operators to refine their services.

 Wearable cameras that have artificial intelligence (AI) facial recognition capabilities can provide a patient with the name of the person who is approaching them. AI can also help a senior’s cognitive load; helping them stay informed regarding day to day decisions. Newly developed website interfaces are making it easier for memory care patients to use and video, audio and sensor technologies can help detect depression or alert, through predictive analytics, a patient having a bad day or an increased risk of falling due to a change in gait. The potential for technology applications in memory care is seemingly endless and there is more research and development in the works. 

 Do you or your loved one have a plan in place in the event you become a memory care patient? Are you aware of the changing options available for living arrangements? Contact our office today and schedule an appointment to discuss how we can help you with your planning.  Simply email us at info@covertlaw.com. or call us at 1.800.660.7564.

Memory Care and the Epidemic of Alzheimer’s

Memory Care and the Epidemic of Alzheimer’s

Alzheimer’s is a chronic neurodegenerative disease typically with a long pre-clinical phase which gradually worsens. Initial symptoms are often mistaken for normal aging and include problems with language, mood swings, disorientation, loss of motivation, poor self-care and behavioral issues. There are no treatments to stop or reverse the disease progression. Alzheimer’s accounts for 60 to 70 percent of dementia cases and is one of the most financially costly diseases. Usually, the disease onset occurs in seniors over the age of 65, and the average life expectancy is 3 to 9 years though the speed of the disease’s progression can vary. 

Estimates are that more than 14 million Americans will be diagnosed with Alzheimer’s disease by the year 2050 and the financial cost to the United States will total more than 1.1 trillion dollars. Memory and medical care for those who have Alzheimer’s will also create challenges for their families starting with the most basic of questions about memory care, understanding what it is, and what it entails. 

Currently, memory care for seniors with advanced Alzheimer’s is best provided in state-licensed assisted living residences or nursing homes with a secure unit designed specifically for memory patients. The unit may be a floor or separate building with security and other cueing devices to help prevent a patient from wandering. Memory care facilities offer programs that are designed to keep executive brain function active and engaged and also offer cognitive behavioral therapies designed specifically for those with memory challenges. However, these facilities are expensive, and with the Alzheimer’s survival rate of 3 to 9 years post diagnosis, many families are not able to pay the associated costs of memory care.

Because of these costs, many families become unpaid caregivers to their loved ones. In the earlier stages of the disease progression it is a workable situation, but before long this selfless act and huge undertaking can take a toll on the caregiver leading to inadequate care for the patient. It is during this family caregiver stage that exploring the longer term options for memory care becomes critical as there will come a time professional memory care will become necessary. There are several options to consider regarding paying for memory care which on average costs nearly 5 times more than seniors who do not require memory care.  

Is your loved one a US Veteran? Research about the Aid & Attendance benefits available to them. Not a veteran? Then explore options for long term care health insurance. Another option is to learn how to spend down assets to qualify for Medicaid. However this must be done very carefully and with the understanding that even with Medicaid there are, and will continue to be, long waiting lists to get into memory care facilities. If you are fortunate enough to be able to private pay for memory care, it is still important to investigate options to identify the right facility for your loved one.

How will you know when professional memory care is needed? Some of the more common indicators are when someone who has Alzheimer’s forgets to take their medication or forgets the codes to alarms or neglects to lock doors. When a person living with dementia forgets their basic house chores or forgets to eat meals, shower, change clothes or groom themselves that is a sign that memory care may be in order. Finally, psychological changes occur such as consistent feelings of anger or confusion, withdrawal or depression, even personality changes such as mistrusting others are indicators that professional memory care is needed.

All people living with dementia should make plans with their family and attorney in the early stages of disease progression as to how they want to be handled medically in the advanced stages of Alzheimer’s. It is much better to have this discussion very early on as it can provide a sense of relief to the patient knowing things will proceed as documented. 

In the absence of a cure for Alzheimer’s all seniors should proactively plan with their family and a trusted elder law attorney to create a plan in the event memory care becomes necessary. Contact our office today and schedule an appointment to discuss how we can help you with your planning by calling us at 1.800.660.7564 or by emailing us at info@covertlaw.com.

Creative Financial Approaches to Long Term Care Services

Creative Financial Approaches to Long Term Care Services

Long term care insurance was sold aggressively in the 1980s, 90s and thereafter to offset the costs of seniors needing to live in a nursing home, assisted living or needing at home health care. Now, however, the business of long term care insurance has dramatically changed. What was once over 100 insurers providing LTC policy for sale has shrunk to a pool of less than twenty insurers who continue to sell the health care product. The big financial problem was that the majority of insurers had badly underestimated the longevity of these long term care policy holders and how many claims would be filed during their lifetime. The model became unsustainable from a business perspective. 

As reported by the Wall Street Journal (https://www.wsj.com/articles/millions-bought-insurance-to-cover-retirement-health-costs-now-they-face-an-awful-choice-1516206708) the industry is now in financial turmoil and has turned to the old adage of privatize the gains and socialize the losses; the translation being that millions of people age sixty-five or older with long term care policies are facing steep rate increases. It is not uncommon for a policy holder to face a fifty percent increase in their premium while some of the worst cases are upwards of ninety percent. Because the industry itself used such poor benchmarks and miscalculated projections, policy holders are seemingly left with two choices: Pay the money or leave your coverage after paying into it for years, and sometimes decades.

What if you want a different choice? Everyone would agree that being priced gouged for premiums as you age is inherently unconscionable but if the policy is discontinued what then will happen to the peace of mind long term care brings? What was once the safety net of senior aging care (without becoming a burden to family members) is rapidly disappearing.

CNBC has recently reported about this very issue and suggests getting financially creative for long term care. (https://www.cnbc.com/2018/02/27/heres-a-surprise-source-you-can-tap-for-long-term-care-services.html) There is a surprising source that you can tap in order to maintain protection for yourself but it requires planning, professional help and time. Do not delay. 

The financially creative premise is to become asset poor, impoverished, and qualify for Medicaid which pays for nursing home care and services. This does not mean the legacy you built during your lifetime will not go to your selected inheritors. On the contrary the assets you own must move out of your name to qualify for Medicaid. The assets will then shift to your designated beneficiary since to qualify you as an individual cannot have over $2,000 in assets.

To begin you will need to retain the services of a qualified elder law attorney, who may also bring in an accountant and a financial advisor. Ideally, you will be able to wait five years before needing long term care and the help of Medicaid. If there are assets transferred during the “five year lookback” it may be subject to penalties or make the applicant ineligible for some period of time requiring them to pay out of pocket.

Now with time on your side it becomes critical to select the right vehicle for transfer. These can be annuities but more often tend to be irrevocable trusts. The assets in the irrevocable trust are no longer under the control of the older person and can provide protection from certain creditors. The vehicle chosen for transfer of assets is very important not only for the older individual but the recipient as well. In the case of an outright gift of appreciated assets (i.e. stocks or real property) there would be no stepped up cost basis which could lead to crushing capital gains taxes when it is time to sell. An elder law attorney with input from your accountant and financial planner can help you choose the right transfer of wealth plan.

Elder law attorneys are closely watching changes in Medicaid,, as Congress is often proposing legislation to change the program.. Be certain your elder law attorney is up to speed on the current requirements, as the eligibility requirements can change very quickly in each state, and sometimes each county.

Though you may never have thought you would find yourself creatively trying to qualify for Medicaid while protecting assets, the current long term care premium prices preclude a large portion of seniors from being able to pay the cost of the policy. Genworth Financial reports the national median cost of a private nursing home room to be $97,455 a year. It doesn’t take long to be wiped out at that cost without long term care. Medicaid may be your solution and time is of the essence for planning. 

Contact our office today and schedule an appointment to discuss how we can help you with your planning.

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Covert | Law

Your Plan. Your Family. Their Future.

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NEIL R. COVERT, Attorney at Law

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1.800.660.7564

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