How to Financially Plan for an Alzheimer’s or Dementia Diagnosis
My friend Rob posted this on my Youtube channel regarding a video I did about Long Term Care. He gave me permission to repost for your reading pleasure:
“My LTC plan is FAR simpler than what you guys are proposing — self-insuring with my HSA.
First, I start contributing the maximum of $7100 at age 50 (better if you start earlier) and continue to contribute $7100 until I stop working (likely at age 65). I don’t know how much LTC policies cost, but I expect it will rival the amount that I am putting in my HSA each year.
I pay ALL of my health expenses out of pocket (even the $20 copay at the doctor’s office) and will have approximately $212,000 in my HSA at age 65 (assuming an average 7.2% return). Then I stop funding the HSA at retirement and let that sucker grow. At age 83, it should grow to $500,000, which is the amount that I plan to have on-hand to fund 3 years of LTC. This approach is easy peasy and has several benefits.
First, I can access the money in a pinch. Second, there is a significant likelihood that I won’t need LTC and if both my wife and I don’t need LTC, that $500,000 can go to my heirs. Conversely, if you buy insurance and never use it, you lose all of the money you have invested in buying insurance you don’t use. Finally, I don’t need to hassle with the insurance company over whether I meet their criteria in terms of daily living. I get to decide when and where I want assistance.
Bottom line: If you plan and take advantage of compounding interest over time, investing $7k a year over the course of your career can easily grow a fund to a sizable amount. Important thing with HSA is to SAVE YOUR RECEIPTS. My HSA website has a link where you can upload documents in the cloud, so you don’t need to keep a shoe box. I have about $10,000 in receipts that I can instruct my HSA to reimburse me at any time if I am in a pinch. And that number will only grow.
Even if don’t use your HSA for LTC, you can use it to fund retirement healthcare expenses (but that will mean giving up on using it to self-fund LTC costs). What that does is, in essence, let the stock market pay for all your medical expenses over your lifetime (i.e., a $1000 expense incurred at age 50 can be fully reimbursed at, say, age 60 if invested at a 7.2% annual return), because there is no time limit on when you can submit your receipts for reimbursement.”
Such a great post. Can’t beleive I didn’t consider this option in the video I did which you can watch here.
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You or a loved one may have just received an Alzheimer’s or dementia diagnosis, and while you may ride waves of shock and sadness, your thoughts may also turn to how you’ll take care of your loved ones (and yourself) financially.
Americans living with Alzheimer’s currently number 5.8 million. One in three seniors dies with Alzheimer’s or another form of dementia, according to the Alzheimer’s Association.
“That number is expected to increase as the population age 65 and older increases. By 2050, nearly 14 million Americans will be living with the disease unless treatments are advanced,” says Ruth Drew, director of information and support services for the Alzheimer’s Association.
Medicare provides limited assistance with costs for families of Alzheimer’s and dementia patients. Medicare benefits are for medical needs and some of the care for Alzheimer’s or dementia is non-medical in nature.
“The reality is that very few people are prepared for the cost of caring for someone living with Alzheimer’s. Many believe health insurance or Medicare will cover costs, but the costs of caring for someone living with Alzheimer’s often extends well beyond these coverages,” says Drew.
Most costs fall on your own shoulders — or those of your family members. As soon as you’re diagnosed, it’s a good idea to get a plan in place because you (or your diagnosed loved one) might not always be able to make sound decisions.
Costs you may face with the diagnosis
There are several types of costs you’ll face with an Alzheimer’s/dementia diagnosis. Remember, these are progressive diseases and your needs will change over time. Insurance may or may not cover these costs, so it’s important to know your options.
Long-term care or caregiver costs
Long-term care services can involve home-based and/or community-based services, assisted living and nursing home care. The Genworth Cost of Care Survey 2018 totaled the following costs:
Non-medical home health aide: $22 per hour and $132 per day
Adult day services: $72 per day
Assisted living facilities: $4,000 per month or $48,000 per year
Private room in a nursing home: $275 per day or $100,375 per year
Semi-private room in a nursing home: $245 per day or $89,297 per year
It’s a good idea to attack the legal angle as soon as possible, too. Consult with an elder law attorney or estate planning attorney as soon as possible to discuss a power of attorney, power of attorney for health care, a living will and/or guardianship.
Power of attorney
A power of attorney gives an agent — the person you designate — the legal authority to act on your behalf if you do not want to or are unable to take care of certain things for yourself.
“If the person already has advanced dementia when first diagnosed, he probably would not have the capacity to create a valid power of attorney,” says Margaret “Pegi” Price, J.D., professor at National University and the author of the book, “The Special Needs Child and Divorce: A Practical Guide to Evaluating and Handling Cases.”
Price says that you should get a letter from your doctor that states that you are of sound mind, can make good decisions and can handle your finances at that time. “He should get this letter at the same time as he prepares the durable power of attorney in case someone later questions the validity of the power of attorney,” she says.
Cost: $200 to $500, depending on the complexity of the document and where the person lives.
Power of attorney for health care
A power of attorney for health care allows someone to make medical decisions for you. You must sign a medical records release so that the agent is allowed to look at your medical records when making decisions, according to Price.
“The healthcare POA needs to be durable, or it will be useless when the person needs it,” says Price. “It is always a good idea to execute several originals of this type of POA, and have one in your medical chart with your primary care doctor, one with the dementia specialist, one in the long-term care or memory care facility and one with the agent named in the POA.”
Cost: $200 to $500, depending on the complexity of the document and where you live.
Living will/standard will
“A living will does the same thing as a medical power of attorney, except that a living will usually only controls end-of-life decisions, or the last days of a person’s life,” says Price.
You might need someone to handle your health care decisions but a living will cannot do that. The health care POA can include authority to make end-of-life decisions in addition to ongoing medical care before you die.
“If the person with dementia is in an advanced stage of the disease and does not have legal capacity, he cannot create a valid living will or standard will, which distributes a person’s assets after his death,” Price says.
Cost: $200 to several times that amount, depending on the complexity of the document(s) and where you live.
Sometimes, a diagnosis doesn’t happen until well after an individual has advanced progression of Alzheimer’s or dementia. Guardianship, also called conservatorship, gives decision-making authority to someone else. It’s the only option if the person with dementia is not of sound mind.
Cost: $1,500 on the low end to several thousand dollars or more for the lawyer filing the guardianship, several hundred dollars in court costs and a couple thousand dollars or more if the court appoints a lawyer to act on behalf of the allegedly impaired person.
Drugs to treat Alzheimer’s disease average about $177 to more than $400 per month according to Consumer Reports. There are three drugs approved by the Food and Drug Administration to treat mild-to-moderate Alzheimer’s currently on the market.
Personal care services involve help with personal hygiene or other personal care. Costs vary, depending on the type of care involved.
The average rate for unskilled home-care assistance is $21 an hour. Medicare generally doesn’t help cover the unskilled care most Alzheimer’s patients need, like bathing, dressing and administering medications.
Memory care units are specifically designed for Alzheimer’s patients. For example, a memory care facility is often set up in a circular layout because individuals with dementia sometimes feel anxiety when they encounter a dissimilar area. They offer more safety, security and relaxation than a regular care facility. It can cost $5,400 per month to reside in a memory care unit or approximately $64,800 per year, according to Dementia Care Central.
There are a variety of types of in-home care you can pursue, whether you opt for companion care or skilled nursing care. Besides personal care services, in-home services could include:
Companion services: Companion services are a non-medical option that offers supervision, recreational activities and/or visits for those with Alzheimer’s or dementia. Cost: Varies, depending on the type of care needed.
Homemaker services: These services help with cleaning a home, shopping or meal preparation. Cost: $72 per day.
Skilled care: This is an option that involves a licensed medical professional. Typically, skilled care nurses injections, physical therapy and other medical needs by a licensed health professional. Cost: $132 per day.
Eventually, it may not be possible to live at home or do in-home care due to safety or family members’ inability to care for you. Specific options include the following:
Retirement home: In the early stages of Alzheimer’s or dementia, a retirement home could be a good fit, particularly because you’ll be able to care for yourself independently. Cost: Between $1,500 and $10,000 per month.
Assisted living: Assisted living is a good option as you become less able to take care of yourself independently. You’ll receive help with meals, basic needs and health care. Cost: $4,000 per month or $48,000 per year.
Nursing home: You’ll get 24/7 medical care. Specific nursing homes could offer care specifically for Alzheimer’s and dementia. Be sure you’re choosing the right type of facility. Cost: $275 per day or $100,375 per year for a private room; $245 per day or $89,297 per year for a semi-private room.
Specialized care unit: Specialized care units put people with Alzheimer’s and dementia together in a unit within a large residential facility. Cost: $233 per day, or $85,045 per year.
Care retirement communities: These types of communities include all of the different levels of needs (retirement, assisted living, nursing home) all together and residents are able to move back and forth. Cost: Upfront fee of $10,000 up to $500,000. You’ll also pay a monthly maintenance fee of roughly $200 to more than $2,000.
Once you know the true costs of paying for the type of care you’d like, here are a few financial resources you can consider:
Personal savings and assets
Now is the time to total up your savings and assets and see how it can fit into the plan of how you’ll pay for your care. Consider any money you might have in the following types of accounts:
Certificates of deposit (CDs)
Money market funds
Treasury bills and notes
Stock and bond funds
It might also be time to consider how you’d like to handle your real estate assets. Do you have a rental property or properties that you’ve used as a source of passive income? If you believe you need to move into a retirement community.
You can also look for a personal loan that has a low APR and interest rate as a back-up plan in case your personal assets can’t cover everything. A personal loan is an unsecured loan, which means it doesn’t require collateral to back it — in other words, you won’t have to give your lender your home or other assets if you fail to pay back your loan. Another benefit to using a personal loan is that if you have a high credit score, you could receive a low-interest loan in as little as 24 to 48 hours.
Whether you’re retired or aren’t quite there yet, you could consider taking distributions from an IRA if you have one. Two major types of IRAs are Traditional and Roth IRAs.
Distributions from Traditional IRAs prior to age 59½ are subject to a 10 percent penalty. On the other hand, you can take qualified distributions from a Roth IRA as long as you’re 59½ without penalty. However, you’ll be penalized for withdrawal of any investment earnings before 59½ unless you have a qualifying reason. Paying for medical expenses (including Alzheimer’s and dementia care) does count, as long as they’re greater than 10 percent of your adjusted gross income.
Look into withdrawing from employee-funded retirement plans, such as a 401(k), 403(b) and Keogh as well.
Insurance and government insurance programs
You might find that you qualify for government insurance programs.
Medicare or supplemental policies
Medicare is a federal health insurance program for people who are 65 or older and who receive Social Security retirement benefits. You may also be able to receive Medicare if you are younger than 65 and have received Social Security disability benefits for at least 24 months.
You can qualify for inpatient hospital care, doctors’ fees and prescription drug coverage through Medicare.
You may qualify for up to 100 days of nursing home care in some circumstances, though Medicare will not cover long-term care.
Hospice care can be covered for end-of-life care.
You might have disability insurance from an employer-paid plan or personal policy. Long-term disability sometimes takes time to process, even up to 90 days and sometimes longer. Some policies pay benefits for the rest of your life, although this varies by policy and by the insurer. Your best bet is to contact your employer-sponsored plan or the disability insurance you’ve paid for on your own.
Group employee plan or retiree medical coverage
A separate group employee plan or retiree medical coverage collaborates with Medicare and also helps pay deductibles, co-payments and out-of-pocket medical expenses not covered by Medicare. Check to see what you’re eligible for if you belong to a group employee pan or another type of retiree medical coverage.
Life insurance and long-term care insurance
Life insurance pays out a sum of money either on the death of the insured person or after a set period. Long-term care insurance helps with the costs of long-term care, such as nursing home care. It is not provided by Medicare, which is an important factor in the decision to purchase it.
Unfortunately, life insurance and long-term care insurance are not usually available for purchase after symptoms of Alzheimer’s appear, but if you had a policy prior to being diagnosed, now is the time to call your insurance company to find out how both can help you.
In 2019, Medicare and Medicaid are expected to cover $195 billion, or 67 percent of the total health care and long-term care payments for people living with dementia.
“While these programs offer vital support to individuals living with Alzheimer’s, out-of-pocket expenditures for families are expected to reach $63 billion this year, not including an additional $234 billion for unpaid family caregiving,” says Drew.
Other potential avenues for governmental help include Social Security Disability Income (SSDI) for workers under age 65, Supplemental Security Income (SSI), VA benefits for current and former military personnel and tax deductions and credits, such as the Household and Dependent Care Credit.
Understanding and accessing these resources can be challenging. Consider consulting with an elder care attorney or contacting your local Area Agency on Aging (AAA) for help.
Servicemembers eligible for a VA pension and who require the aid and attendance of another person or are housebound may be eligible for additional monetary payment through Aid and Attendance and Housebound allowances. You can apply through the VA website.
The most common concern regarding financial resources is often how to pay for long-term care. Some legal aid societies can help. Often, the social services department at some large care facilities can give your family resources available in the area. Also consider community support, including low- or no-cost support services, respite care, support groups, transportation and meal delivery.
Many states offer financial assistance for persons with Alzheimer’s and dementia, which is paid for by the state’s general fund. Some of these programs are specifically for dementia (and require a formal diagnosis) and others are simply intended for individuals with age-related care needs, according to Drew. California, Delaware, Kentucky and West Virginia have programs for adult day care. Wisconsin, Vermont and Oregon have programs that pay for in-home dementia care.
Many of these programs are funded through the Older Americans Act. The programs receive a limited amount of funding and are only able to help a smaller percentage of individuals, and waiting lists are common. To find out about programs in your area, contact the local Area Agency on Aging (AAA).