Not a Pleasant Topic: How can End of Life Care Affect Your Finances?
End-of-Life Care, also known as Hospice, is not something that most people want to think about. Right now we’re young and healthy and we don’t want to think about a time when we will be anything else, right?
As The Big Guy and I hone in on our retirement number, this is something we have to take into consideration – and so should you! I’m not asking you to make life-or-death decisions today, what I want you to instead think about is the cost of end of life care and how it can affect your and your family’s finances. End of life care is hard enough on family, you don’t want it destroying finances as well, do you?
In 2007, the National Alliance for Caregiver and United Healthcare (the health insurer) sponsored a study to find out what the average out-of-pocket expenses were for end-of-life care. What the study found was that an average of $5,531 was spent on hospice care per year. This number is on top of health insurance premiums which as you know, can run anywhere from $200 to $900 per month, for a total cost per year of $7,931 on the low end and $16,331 on the high end.
Additionally, this cost is usually put upon individuals living on a fixed, retirement income, further adding to the financial stress.
Has this additional cost been factored into your retirement calculations? If it hasn’t, you should really give it some thought. Also, has this cost been factored into your parents retirement calculations? This issue can be very tricky to talk about parents with, but realize that if they run out of money for this care, the responsibility will fall to you.
Some ways to prepare:
- Consider your insurance options: Will you be using private, employer, or government health insurance during your retirement? Each option drastically changes the cost of hospice care.
- Contact your insurer: Find out what the current costs of end-of-life care are. This can be a hard number to determine, but chances are you can find out from your current insurer what percentage of costs you will be responsible for. When in doubt, use the average number above.
- Consider the effect on your retirement: How much income are you planning on in retirement? Can you pay for end-of-life care as well as continue paying monthly bills based on what you have allocated? Are you on track to have your target number saved by retirement age?
Steps to take:
- Power of Attorney: an older family member should have a power of attorney set up for financial and health decisions. All bank account and health wishes should be shared with the individual holding power of attorney.
- Start Planning Now: I cannot say enough how important it is to think about the cost of end of life care now, while you are young. Preparation is key!
- Elder-Law Attorney: this is an expensive option, but one that is well-worth it if the older relative has significant assets. The attorney can help the family to navigate the state’s medicaid program as well as any financial issues that may arise.
- Reverse Mortgages: Maybe your relative does not have the assets to pay for their end-of-life-care. Take a look what equity they may be able to utilize while still living in the home. (Note: I do not recommend this option, but, it is an option)
- Discuss Possible Changes in Wills. If older relatives have significant amounts of money tied up in annuities, consider changing the will to allow that money to be moved to cover medical costs, rather than providing undue burden on younger family members.
The reality is that discussing things like end-of-life care can be difficult to discuss. However, making decisions about end of life care in the heat of the moment is unlikely to lead to harmonious decisions and can many times come between family members. It is better to discuss them now then to be at family member’s throats during such a difficult time.
Have you taken time to consider end-of-life care options? What conclusions have you come to? Are the costs factored into your retirement number?
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