PBS: Rising Home Prices Not Enough to Secure Seniors’ Nest-Eggs

Paying for long-term care can force seniors to spend sizable portions of their savings, and for seniors whose most valuable asset is their home, these costs threaten to deplete nest-egg savings.

About 70% of Americans when they are over age 65 will need some form of long-term care, according to a PBS interview with Dr. Bruce Chernof, president and CEO of the SCAN Foundation—a non-profit public charity focused on senior issues.

Although home prices have been signaling a steady improvement, the number of underwater homes in many parts of the country might leave older homeowners scrambling to pay for the nation’s long-term care crisis.

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PBS reports:

And most families are not well-prepared, particularly right now, because we’ve gone through this incredible economic downturn. And for many seniors who’ve been living on a fixed income, whatever savings they’ve had have not kept up and/or are not delivering the kind of day-to-day income that they need to live.

People are actually spending their savings, because, for example, they’re not generating enough income off their savings.

The other observation that’s really important is that for many seniors, their most valuable asset may be their home. And home prices in many parts of the country—while they’re starting to improve—are still underwater.

And so that really important nest-egg that might have been a reserve is less strong today than it was a few years ago. So the likelihood for spending down goes up dramatically. And not just for folks who are close to being poor, but for middle-income folks who just aren’t prepared for the enormous cost that long-term care can bring.

Chernof, who was recently appointed to a Congress-created commission devoted to addressing the nation’s long-term care crisis, suggests that a good defense to securing savings is a proactive planning approach.

Chernof also suggests that the nation’s healthcare crisis should cannot rely solely on the shoulders of Medicaid, as the program only “picks up the tab” once seniors have depleted large portions of their savings.

Read the PBS interview.

Written by Jason Oliva

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  • Janson, a correction is needed in the last paragraph – it should read Medicaid instead of Medicare. Medicare isn’t income/asset based but pays for acute care after a hospital stay. Medicaid is based on income/asset qualifying where one would have to spend down their savings to qualify.

    This is a strong and powerful message. I serve on the Own Your Future MN Advisory Panel. Own Your Future is a federal and state initiative to bring awareness of the need for planning for long-term care. Twenty-six other states have an Own Your Future campaign – launched several years ago with a focus mostly on long-term care insurance.

    Fortunately MN’s Own Your Future (launched last Oct.) encourages people to look at several options for funding their long-term care needs including reverse mortgages. Phase 1 is focused on bringing awareness to Minnesotans on the need for planning. Phase 2 is identifying products, bringing existing product awareness and looking at development of additional products to pay for the long-term care. We just had our 1st meeting of this sub-committee yesterday. Phase 3 will exploring reform of Medicaid Long-Term Care provisions to better support and incent private financing.

    • Beth,

      You bring up some interesting points.

      For a few years now we have been reading about a possible new reverse mortgage being looked at in Minnesota through the state government which would be used to pay for long-term care. Since Minnesota is such a small population base and property values are generally higher throughout much of the state, this is a great place to experiment. Can you elaborate on the progress of that product?

      As to Phase 1 who is the targeted audience? In Phase 2, what types of products will you be looking at? Once identified, how will will it be sponsored or identified? As to Phase 3, is the state willing to commit resources?

      • The Cynic,
        I have no updates on a state reverse mortgage.

        Phase 1 of Own Your Future is focused on those ages 40 through 65, encouraging them to plan for their future and long term care needs. While the mailing and other marketing efforts were/are being done to that age group, we are doing talks to all ages including seniors. As one of the Advisory Panel members I do presentations and outreach on this topic. You can find more info on the website, http://www.mn.gov/ownyourfuture. This includes updates on the Advisory Panel meetings.

        We are just in the process of starting Phase 2. At the 1st meeting this sub-committee was educated on long-term care insurance, other insurance products and savings options currently available as well as reverse mortgages (I was the presenter for this portion). It’s too early in the process to identify what products will be developed and/or the next steps.

        Since we haven’t started Phase 3, I can’t provide any information other than the goal is to be exploring reform of Medicaid Long-Term Care provisions to better support and incent private financing.

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