According to a recent study by the AARP, most Americans believe that Medicare will pay for their parents’ long-term care. This is simply not true. Medicare only covers acute episodes such as heart attack, cancer or repairing broken hips.
That leaves families to pay for the costs of assisted living (average $35,000/year), nursing homes (average $74,000/year) or in-home help, as well as housing, medical supplies and equipment, clothing, home repairs, cellular telephones and other miscellaneous items. These costs can really add up.
A recent article by The New York Times highlighted the experiences and expenses of several Baby Boomers with ailing parents. One borrowed against her 401(k) retirement plan, sold her home and depleted 20 years of savings. Another wiped out her savings account and fell $5,000 into debt flying across the country to care for her mother after she slipped and fell. A third accumulated $20,000 in debt before finally having her line of credit cut off.
One family even flew their nanny to Florida to look after their parents and have been contributing $1,000 per month for the parent’s care, despite the fact that the parents still own a home and have considerable assets.
Although well meaning, this type of spending isn’t sound financial planning. Instead, families should pay all expenses from the parents’ money first, which if depleted would then entitle them to Medicaid. An experienced elder law professional can help, allowing Boomers to keep their hard-earned savings.
The New York Times, December 30, 2006