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How to Broach the Subject of Long-Term Care With Clients

US News & World Report -  Money logo US News & World Report - Money 4/7/2021 Julie Pinkerton
a group of people sitting at a table: An accountant explaining financial matters to a couple. © (Getty Images) An accountant explaining financial matters to a couple.

As America's population ages, long-term care has become an integral part of the dialogue on retirement needs.

From 2000 to 2040, the number of Americans age 65 and older will more than double, reaching 80 million, U.S. Census Bureau data shows. The number of adults age 85 and older, a population most likely to need assistance with basic personal care, will nearly quadruple.

Financial advisors have many tools to help their clients navigate retirement, and although accumulating a large nest egg is a fundamental goal, understanding how longevity can undermine that goal is equally critical.

Advisors are often reluctant to broach such an intimate topic as long-term care insurance. But reframing the conversation allows clients to willingly engage in decisions about long-term care that will enable them to retain control, even if one day, they are unable to care for themselves.

Take these steps to introduce your clients to long-term care planning.

Begin With Your Clients' Optimal Scenario

Start by asking how they envision their retirement years to progress, including how long they think they might live and how their daily life may evolve with age. Children are often a parent's favorite topic, so ask open-ended questions about their relationships with their children and gather information about the kids' family units, careers and responsibilities.

This first discovery talk is generally positive and will give you a reference for discussing your clients' potential resources for informal care as their health starts to decline.

Empower Clients to Be Proactive

Help your clients explore their inner thoughts about long-term care. It's common for them to say they don't want to be a burden and that they want to be able to remain in their own home. An astute financial advisor will honor these desires and refine their clients' expectations to match the reality of their situation.

As you continue to acknowledge their expectations, move on to more probing questions. You might ask, "If you could no longer live at home, would your preference be to move closer to your daughter or to check out a senior living community?" Once your client indicates a preference, you can ask follow-up questions, such as "Have you explored this option yet?" This will give you a better idea of how much thought your client has already put into long-term care.

Introduce the Financial Aspects of Long-Term Care

The cost of long-term care is an obstacle for many folks. According to the Genworth 2020 Cost of Care Study, the national median price for basic in-home services is $54,912 annually. And clients are typically surprised to learn that Medicare provides extremely limited coverage for long-term care needs.

The value of long-term care, however, can be great. Paint a verbal picture of the challenges a caregiver faces with an easily visualized scenario. For example, ask clients to picture lifting a spouse or partner off the floor. If they cannot physically care for their loved ones, they will need to pay for professional services. Also, services such as bathing and dressing are often easier to accept from an outside party than from a family member, especially if that person is caring for a parent of the opposite gender. Building the flexibility of an outside care provider into a longevity plan can give the client comfort.

Provide Options to Fill Gaps in Long-Term Care Planning

A longevity plan is like a map that indicates the direction a client wants to take when faced with a new fork in the road. The plan includes the financial resources to make the chosen route viable.

A client with significant net worth may believe that self-funding is sufficient. But planning to pay for long-term care needs with current assets may create unintended deficits in the overall financial plan.

Financial advisors often rely on the "4% rule" as a measurement of how much wealth can be spent in retirement. For a client with $1 million in assets at age 65, this translates to about $40,000 per year until their early 90s. Meanwhile, basic caregiving services can easily exceed $50,000 annually.

Rising income and property taxes, home maintenance and other factors can push these numbers to a breaking point, especially if your clients outlive their life expectancy. And increasing investment risk to raise return is generally not recommended in these later years. Both clients and advisors who have not had previous firsthand caregiving experience often find it difficult to appreciate the challenging decisions and significant costs involved with longevity planning.

A long-term care policy is an insurance product that mitigates the risk of outliving your money after the payment of a premium. As such, it is not comparable to an investment in the stock market, for example. However, it can quickly become a valuable financial asset in a long-term care scenario, as it delivers the liquidity to pay for specific services at the exact time they are needed.

Long-term care insurance must also already be in place before a client needs it. Waiting too long to apply often results in denial.

Encourage Clients to Prepare for Unexpected Challenges

Clients who don't have children often recognize they do not have a built-in caregiver. More parents are realizing, however, that having children does not guarantee that they will have care in their old age. Children may have conflicting personal and professional obligations, have their own financial challenges or may not be able to accept that their parents are no longer able to care for themselves. Having a long-term care policy creates a viable backstop if your client's preferred plan does not come to fruition.

The COVID-19 pandemic has placed a spotlight on hospitals and nursing homes. Family members have been denied the ability to serve as bedside advocates for their loved ones, an important safeguard in their care. A long-term care policy creates new options to secure professional services in a family setting. Familiar faces are important for a senior's well-being, especially in cases of dementia.

Explore Partnerships With Other Professionals

Longevity planning is an area that lends itself to collaboration with other industry advisors, such as certified elder law attorneys and Social Security and Medicare experts. A long-term care specialist can offer nuanced expertise in the numerous policy options and make recommendations.

Involve Heirs in Longevity Planning

Your clients' children can also be your partners in preparing for their parents' long-term care. Creating a continuity to successor generations and the retention of assets are key to a successful multigenerational practice.

A personalized longevity plan is priceless because it gives surviving family members a sense that they honored their loved ones' wishes in their time of need. For a financial advisor, facilitating this important dialogue can make the difference between despair and dignity in the final chapter of your clients' lives.

Copyright 2021 U.S. News & World Report


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