Retirement -- Financial Planning for the Survivor.

[Alan]

DW gets 50% of my pension plus we have life insurance on me. Don't need life insurance on her.

 

[youbet]

Before pushing the RE button, did Firecalc (and a few other tools) runs for all three scenarios: Both live, I die early, she dies early. All had to pass before I forgot the meaning of w*ork and income.

Determing how much either of us would have given the death of the other was very easy. Determing what the expenses of one of us alone would be required a little more thought.

 

[Zoocat]

It would probably help to do a little financial planning since with $400K in assets (plus a house?) I suspect that much of this will eventually be inheritance to you and your sister (and others?).

Price a local nursing home. You can do this over the phone just for budgeting purposes. In the Houston area you can get a real good one (if any can be called good) for about $60K per year. Subtract out any SS and pensions because he won't have any expenses except his medications once he's in one. The same applies to assisted living but that's much cheaper -- about $40K per year in Houston.

You then have a rough estimate of what expenses he'll need from his assets. If he gets $24K in SS, that means for nursing care he'd need $36K from his assets if he lived in Houston. Depending on you estimated return, his assets are adequate for 12 to 20 years. The odds are highly against him lasting that length of time in a nursing facility.

What's my point? I don't think you want him to be too conservative because he still needs to protect himself financially if he does live almost forever. If he doesn't live 10+ more years, the assets will go to you and your sister who are still decades away from a similar situation as your father.

I'd suggest no more than 50 or 60% in fixed income. That by itself is enough to cover many years of care and probably more than he will need.

Thanks again! He has already done the requisite financial planning and my sister is a FP although not a practicing one. I hadn't thought about the actual costs that would be paid including the SS and pension. That gives me more hope!

 

[FreeAtLast]

I was widowed about 6 years ago at age 50 so my plan only includes myself. Fortunatly my late wife was an insurance agent and insured both of us to the Max. I am in decent shape to go it alone.

I now worry what will happen if I re-marry some day and my plans all have to change. This seems to be a big unknown for me.

 

[haha]

I now worry what will happen if I re-marry some day and my plans all have to change. This seems to be a big unknown for me.

But an unknown that is easy to avoid.

Ha

 

[Alan]

It's more than just money when planning for the unspeakable. In 2000 our best friends were all set for retirement. She had retired from teaching several years earlier, he was 60. Christmas Eve he and I car pooled to work, then I was an vacation 'til the next year. Dec 31 was his last day at work. Dec 30 she called me from the Emergency room. He had collapsed in the kitchen. A few hours later he was dead. No existing health problems, but his brain just stopped sending signals to his heart - shortage of potassium I think did it.

They were multi millionaires, owned 37 properties, but he did all the finances. She was totally unprepared emotionally and reallly struggled to manage the finances.

Shortly afterwards DW signed up for night classes at the local uni where they were running classes on planning for retirement and we went together and we now share the financial planning burden together.

 

[Marquette]

We do everything together. At first I thought it might be more of a generation / age thing, but even the younger folks at Bogleheads thought it was weird that we were both there. Apparently it's usually one or the other that gets interested in investing and finances.

We also haven't ruled out an FA or RIA down the road. We'll see how it goes.

 

[Walt34]

Good luck. My in-laws didn't understand why they should worry about power of attorny's or wills. Fortunately, DW badgered them until they got all the paperwork in place before MIL fell and broke her hip.

Even though the doctor said she'd never be able to go back home, they both talked about it like it would happen "as soon as she got better." Even after my FIL was diagnosed with Alzheimer's and moved into assisted living, they still talked about moving home "when they both got better."

He fought going in for several months and made DW feel like crap during the whole time. He blew a gasket when he found out the house was sold. MIL was also upset because they didn't have a place to move to when they got better.

Staying in their home is a major fixation for many of the elderly even when it totally defies logic or rational decision making. At a certain point you just have to do what needs to be done for them whether they like it or not.

If your father is mentally competent it's harder to take control. At a certain point you just have to let it go and realize that his mistakes are his problem. If he financially destroys himself, he will get a much worse "final years" than if he made more rational decisions. The house as a major asset is somewhat of a backstop. Eventually, he won't be able to afford it and then the sale becomes a necessity even if he still fights it. Just keep him away from the reverse mortgage thieves.

He has done some planning - the house, his only asset, is in a revocable living trust with DW and the sane SIL as administrators. When we took out the small mortgage on the house to do the repairs on it the small-town banker was a guy right out of It's a Wonderful Life. He said they won't sell reverse mortgages (one SIL thought that might be a good idea and I talked her out of it) and the bank had no problems with underperforming loans as they didn't get caught up in the rush.

So for now all we can do is do what we can and if the house of cards collapses then in the end, as you say, it is his problem, as we don't have the resources to support him long term without putting our own future in jeopardy. He has visited the retirement community and said he could live with it. At the suggestion of SIL we're going to call the place and see if we can get him to visit more often, say go once a week for a meal in the cafeteria, to get him used to the idea of living there.

 

[Milton]

Even though the doctor said she'd never be able to go back home, they both talked about it like it would happen "as soon as she got better." Even after my FIL was diagnosed with Alzheimer's and moved into assisted living, they still talked about moving home "when they both got better."

Human nature: hope springs eternal. Few of us are brave enough to admit that it's all over and that life is downhill from here on.

Staying in their home is a major fixation for many of the elderly even when it totally defies logic or rational decision making. At a certain point you just have to do what needs to be done for them whether they like it or not.

As a general rule, I'd suggest that the "certain point" is when they become a danger to themselves (repeatedly forgetting to turn off the stove burners, etc.) and can no longer safely live alone. Otherwise, their wishes should generally be respected, rational or not.

If your father is mentally competent it's harder to take control. At a certain point you just have to let it go and realize that his mistakes are his problem. If he financially destroys himself, he will get a much worse "final years" than if he made more rational decisions. The house as a major asset is somewhat of a backstop. Eventually, he won't be able to afford it and then the sale becomes a necessity even if he still fights it. Just keep him away from the reverse mortgage thieves.

Sensible advice.

 

[2B]

As a general rule, I'd suggest that the "certain point" is when they become a danger to themselves (repeatedly forgetting to turn off the stove burners, etc.) and can no longer safely live alone. Otherwise, their wishes should generally be respected, rational or not.

The "certain point" occurred when my FIL was diagnosed with Alzheimer's. With Alzheimer's, Texas says he is no longer a valid driver. There goes his transportation. He also had no way to visit his wife in the nursing home so DW became a permanent chauffer. DW tried to stock his fridge with food but he could not cook or even reheat things in a microwave. His mental capability had gone done so much.

He could still live there but he required help with the most basic living skills. He also wouldn't admit he couldn't do things even when he had just not been able to do it. At a certain point the parent-child relationship reverses and the longer someone delays doing what needs to be done the more damage occurs.

 

[chinaco]

...
He could still live there but he required help with the most basic living skills. He also wouldn't admit he couldn't do things even when he had just not been able to do it. At a certain point the parent-child relationship reverses and the longer someone delays doing what needs to be done the more damage occurs.

Sorry you are going through that.

It is a dreadful and difficult disease. Perhaps worse on the caregiver than the person with the disease.

If you have not read about the stages of the disease, I would suggest you do so. It is worth the effort.

One trap that you cannot fall into is trying to reason with someone that is incapable of being reasonable. Hopefully you have Power of attorney for health and finance. Or you will need to step in and get guardianship if you have not done so already (you will need to get a lawyer and go to court).

 

[2B]

Sorry you are going through that.

It is a dreadful and difficult disease. Perhaps worse on the caregiver than the person with the disease.

If you have not read about the stages of the disease, I would suggest you do so. It is worth the effort.

One trap that you cannot fall into is trying to reason with someone that is incapable of being reasonable. Hopefully you have Power of attorney for health and finance. Or you will need to step in and get guardianship if you have not done so already (you will need to get a lawyer and go to court).

After my father died, the value of having the right paperwork became real obvious to me. My father had it all done perfectly with medical POA, regular POA, will, etc. The only mistake is that he put all of his assets into a high fee variable annuity so he could qualify for a Medicaid nursing home if he lived beyond his LTC insurance limit.

DW inquired about her parents at my urging. They had absolutely nothing and didn't see why they would need anything. About 2 years of pestering finally got them to get things done properly. Within 2 years of getting this done, MIL fell and broke her hip. She had Parkinsons and the walker made her look old. After about a year of her in a nursing home, FIL got diagnosed with Alzheimer's. Having the paperwork is really saving our butts.

I know way too much about Alzheimer's and other forms of senior dementia. I hope to die well before anything like these set in on me.

 

[youbet]

The only mistake is that he put all of his assets into a high fee variable annuity so he could qualify for a Medicaid nursing home if he lived beyond his LTC insurance limit.

Investing assets to "hide" them in order to qualify for Medicaid seems to frequently turn out to be a mistake. The "hiding places" (such as the variable annuity you mention) are often inferior investments and the investor often receives far inferior care while on Medicaid than private pay patients receive.

I'm sure someone will have an anecdotal example where an elderly person with significant assets successfully had Medicaid pay for nursing care, received great care in a nice facility, got great investment returns and passed the money on to a deserving, grateful child. My observations are that either the care was inferior, the investment stunk or the child didn't want or deserve the inheritance, or some combination.

 

[Milton]

Sorry you are going through that.

It is a dreadful and difficult disease. Perhaps worse on the caregiver than the person with the disease.

If you have not read about the stages of the disease, I would suggest you do so. It is worth the effort.

One trap that you cannot fall into is trying to reason with someone that is incapable of being reasonable. Hopefully you have Power of attorney for health and finance. Or you will need to step in and get guardianship if you have not done so already (you will need to get a lawyer and go to court).

I second (all of) the above.

 

[FinanceDude]

Investing assets to "hide" them in order to qualify for Medicaid seems to frequently turn out to be a mistake. The "hiding places" (such as the variable annuity you mention) are often inferior investments and the investor often receives far inferior care while on Medicaid than private pay patients receive.

Which is why most states do a "look-back" of 5 years today instead of the 2 years they used to do.

I'm sure someone will have an anecdotal example where an elderly person with significant assets successfully had Medicaid pay for nursing care, received great care in a nice facility, got great investment returns and passed the money on to a deserving, grateful child.

It's about as likely as winning the lottery. My FIL was a brittle diabetic and had dementia. He spent the last 20 years of his life is a combination of assisted living and nursing homes. Medicaid MADE him MOVE 5 times in that time period, which was traumatic on him and us as well...........

 

[Gardnr]

Investing assets to "hide" them in order to qualify for Medicaid seems to frequently turn out to be a mistake. The "hiding places" (such as the variable annuity you mention) are often inferior investments and the investor often receives far inferior care while on Medicaid than private pay patients receive.

I'm sure someone will have an anecdotal example where an elderly person with significant assets successfully had Medicaid pay for nursing care, received great care in a nice facility, got great investment returns and passed the money on to a deserving, grateful child. My observations are that either the care was inferior, the investment stunk or the child didn't want or deserve the inheritance, or some combination.

Oh, and then there's that little issue of fraudulently claiming to be destitute when you really have assets in order to go on welfare (Medicaid).

It's amazing to me that so many people don't have any problem thinking about doing this when they are outraged at people cheating at the more conventional welfare "game." Plenty of these same people also are adamantly against any kind of government managed healthcare system.

It's a weird and aggravating phenomenon. There's a real lack of integrity in our society.

 

[chinaco]

There are a number of legal strategies to protect assets and be eligible for Medicaid. State increased the look back period recently increased to try to combat it.

There are two parties that might seek protection... Surviving Spouse and other potential heirs.

In the surviving spouse situation, I believe it is perfectly acceptable to use legitimate and legal means to protect assets. Most states have provisions for the spouse... but they are not all equal some states leave the survivor with the house and a small amount of assets plus a low income... others allow the assets to be split.

IMHO - If a couple does not have LTC Insurance or a substantial amount of assets... they better to plan for this situation in some way. It is one of the most likely scenarios that will leave the survivor in bad financial shape. If it is legal... and it protects one... do it. Better than being left in poverty. The average time spent in a nursing home is a few years... every once in a while it is 5, 7 or longer.

For example say you live in a state that splits the assets and limits the income of the survivor. They both draw SS. They have combined assets of $500k. Both are age 67. The husband has a stroke and off to the NH. The wife now has to spend down to the Medicaid level. So she has to spend down $250k. He lives for 4 years ( x $80k year). That is approx 320k. in year 4 he qualifies for Medicaid. However, the state will require his pension to be and SS... they will pay the rest. DW is left with her SS and her $250 + house. Now the husband dies. She has SS (lets say that is 16k). Plus she can use 4% of the $250k which is $10k. She will need to be able to survive on $26k. She might be able to do that... but it is less than the $36k per year (40% more) she could have had. And that is the good scenario. Some states have near draconian rules for the survivor.

One consideration all should investigate are the rules for their state. The survivor might be better off relocating to a different state.

Children using those scenarios and putting the parent in a nursing home smells a bit.