Suze Orman is one of the nation's best-known, most-trusted personal finance experts. A best-selling author and award-winning TV personality, she's become a guru for frugality and planning, advising millions to save for retirement, get out of debt and start a healthier relationship with money.
And yet, Orman now confesses, when it came time to become a caregiver for her late mother, she was as unprepared, emotionally and financially, as the rest of us.
It was just a few years ago when Orman realized that the harsh Chicago winter was taking a physical and psychological toll on her mother, Ann, who was then in her 90s and living alone. "She just stayed at home and wouldn't go out for months on end," Orman says. While Orman lived in San Francisco, her brothers were nearby – one lived in Chicago and picked Ann up for Sunday dinners. But that wasn't enough to maintain her spirits and health.
Following a family discussion about their mother's long-term care, Orman made an unusual decision: She not only moved her mother to an assisted living facility in Florida, but pulled up stakes herself. Orman and her wife left their Bay Area home and relocated to Florida so they could see Ann every day.
Moving cross-country to accommodate caregiving demands would be financially impossible for many Americans, of course. Today, more than 8 million of the nation's 65 million family caregivers live two or more hours away from the care recipient, says the nonprofit group Caring From a Distance. About 42 percent of caregivers have moved a parent into their own home for three years or more, in large part to keep costs down, according to the Genworth 2013 Cost of Care study.
(MORE: When and How to Coax Your Parent to Move Closer)
Another unique element of Orman's approach was that she arranged to move into the assisted living facility during her mom's first week at the site to help Ann adjust and settle in. "I looked at it like the first day of school," Orman says. "You want to ease your parent's transition to something new and I wanted to see firsthand how things ran. It's one thing to make an initial VIP visit to a facility. It's another to wake up and have breakfast in the dining room with everyone else and experience the daily routine." She chuckles as she remembers residents and staff wondering why Suze Orman was in assisted living, but the experiment gave her insights into the realities of long-term care.
The Rising Demand for Care
At least 70 percent of people over 65 will eventually need some form of long-term care, either at home or in a nursing home, according to the U.S. Department of Health and Human Services. That's an expense that will not be completely covered by Medicare. Most Americans are unaware of that fact. Orman knew, but says she had never succeeded in getting her mother to discuss and select a long-term care plan that would have covered her costs.
"I filled out the paperwork on long-term care plans and gave it to my mom on several occasions, but she never signed them," Orman says. She believes it's typical for parents, especially mothers, not to want their children to worry about them. But without robust savings or a good long-term care plan, the financial burden will most likely fall to adult daughters and sons.
"I spent $25,000 a month the last two years of my mom's life to have around-the-clock care for her," Orman says. "I was lucky because I was in a position to afford the cost, something most Americans cannot do."
Last week, the federal Commission on Long-Term Care, a task force created by Congress to suggest solutions for the gaps in long-term care coverage nationwide, issued recommendations that recognized the tremendous financial burden of care costs on families. Its report included ideas to support the roles that family caregivers play in the system. But the panel offered no specific plan for financing the nation's long-term care needs.
"Medicare does not cover long-term care, private insurance is unaffordable or unavailable to the vast majority of Americans and individuals and families are forced to spend down their life savings into poverty before getting help from Medicaid," Howard Bedlin, vice president of public policy and advocacy for the National Council on Aging, said in a statement responding to the commission's report. "It is now time for Congress to stop ignoring the problem and take action. Far too many members of Congress are out of touch with the enormous challenges faced by millions of middle-class families struggling to afford long-term care services needed to stay at home and out of institutions and relieve the tremendous economic, physical and emotional burdens of caregiving."
Orman advises caregivers to avoid living in denial of the reality Bedlin describes. Doing so may cost families their financial stability and their own prospects for retirement. "It's easy to die," she says. "It's hard to age."
3 Guidelines to Follow
Orman has counseled members of her own extended family to secure long-term care plans only if they can afford the premiums and commit to paying into the plan for as long as 10 years. Her website offers other financial-planning tools and guidance for completing must-have legal and financial family documents, but she shares these general tips for anyone facing the challenge of financing long-term care:
- Buy only what is affordable Don't stretch your resources to buy a long-term care policy that covers 100 percent of anticipated future costs. It makes no sense to buy a policy today that you will have to abandon in a few years because it is too expensive; you will get no benefit if that happens. It is smarter to buy the amount of coverage for which you are sure you can keep making premium payments. In other words, it's better to have a policy that will cover 25 to 50 percent of future costs than no policy at all.
- Insist on inflation adjustment The cost of care rises each year, so you need a policy whose benefit will also increase. Given the above-average inflation rate for health services, seek a 5 percent annual inflation adjustment.
- Aim for the shortest possible "elimination period." This is the time before your policy kicks in. If you have a 30-day elimination period, for example, that means you'd have to pay for your first 30 days of long-term care out of pocket. The shorter your elimination period – 30 days is typical – the pricier the policy. If your policy's period is 90 days or longer, make sure you have other assets that you could draw on to pay for care for that length of time.