My parents fund their retirement community with savings, a pension, and social security. But “would homelessness be likely” if they ran out of money?
First of all, I appreciate all the retirement scenarios that are shared here – they are very helpful!
However, I wonder about the difficult question of what happens if someone runs out of money towards the end of their life.
For example, my parents come to a turning point in life where they need a lot more care. They have good resources, counselors and have developed a good plan living in a progressive care retirement community. However, what if they both need skilled nursing (a bill of $10,000 each per month, with $6,000 each coming from savings, after pension, Social Security and long-term care are applied to the bill). Now suppose they both live for another 10 years in this environment (which is terrible to think about). It would drain all of their resources, no matter how carefully they are invested.
So what happens when someone runs out of money to support their room and board? Does Medicaid intervene? Do other programs come into play? Would homelessness be likely? In their case, there is a charitable aspect to the establishment where they are, so it is less of a real concern for them.
However, for anyone who might not benefit from the charity, what happens in this scenario? Everyone who reads your collective advice probably has good intentions of saving to make their retirement comfortable. What about that worst-case scenario when resources run out – so what?
See: I’ll be 65 soon, I’ve got $320,000 in retirement savings and a house paid off, but I’m $46,000 in debt – should I take more money out of my investments?
You ask really important questions.
The thought of running out of money in retirement, especially during a vulnerable time in life, is a major concern for many Americans — and with good reason. Retirement is an expensive time, especially considering health care and long-term needs, and retirees typically live on a fixed income. Depending on how much they have saved, they might have enough to survive the rest of their lives, or they might struggle to get by.
So it makes perfect sense that individuals and their families, like you, are worried about paying for assisted living facilities, retirement homes and other retirement communities during this time. Long-term care is not cheap.
I’ll start with the good news. In a situation like the one you mentioned, homelessness isn’t very likely, said Karen Heider, senior wealth advisor at Concenture Wealth Management.
There are several ways to handle this type of situation, although it boils down to a few factors including state benefits and installation. And that’s assuming the individual has already spent all of their assets, sold the primary residence, and doesn’t have long-term care insurance, Heider said.
Read the MarketWatch column “Retirement Hacks” for practical advice for your own retirement savings journey
A family member can step in to help pay the bills, but that’s not always possible. There are charitable opportunities, as you mentioned your parents have where they live, but that’s not always available either. Medicare doesn’t cover much in long-term care situations, unless it’s short-term care after a hospital stay. Here’s more information about Medicare and long-term care from AARP.
When all of these avenues have been explored, the next option may be to move to another facility where they will be eligible to receive benefits.
“The most likely scenario is having to move from one facility to another to ensure Medicaid benefits are accepted there,” Heider said. “Some facilities are accepting a limited number of people through Medicaid, so finding availability could also be a reason for having to move facilities.”
The process can seem daunting. Individuals, or their family members if they are lucky enough to have helped them, can feel like they are on the phone for days calling their Medicaid representatives and local facilities to see what benefits they qualify for. , how the app works (or how long it would take) and even if there are rooms available to start with. There might be an advocate in the current establishment who can help find transfer information.
There are different plans available under Medicaid, as you may know, so coverage varies and it is important to get clear and explicit information about the options available and the timelines. The process can take weeks or months, so it’s best to jump on it as soon as possible.
Here’s more information about Medicaid.gov beneficiary resources. Individuals should also contact their state Medicaid office. Veterans can also find helpful resources through the Department of Veterans Affairs, such as possible long-term care facilities. Look for local Agencies, which may be public or private nonprofit organizations in your area that focus on the needs of older adults.
Keep in mind that establishments might try to pressure a non-paying resident to leave, said David Bize, certified financial planner at First Allied. State laws vary on how facilities can handle this situation. “The bottom line is whether you want to go through the hassle of fighting/pursuing the installation and potentially losing a court battle with added extra costs,” he said. “Obviously ask, ask and ask, ahead of time and get it in writing, so you know what to expect and no surprises.”
Additionally, families may want to consult with a Medicaid “crisis planning” attorney to navigate the potentially complicated rules regarding these benefits.
Also see: How to think about the risk of big expenses for long-term care
For readers who dread falling into this scenario one day, the key is in planning. Look into long-term care insurance policies, which could look like stand-alone policies or be a hybrid model in conjunction with life insurance. Think years ahead about what kind of care you want to receive in your old age, and where or by whom – then start estimating how much it will cost for that care (and factor in inflation too).
And remember, this is a problem that can affect anyone. About a quarter of today’s 65-year-olds will have a “severe need” for long-term care, and 38% will have a “moderate need”, found the Center for Retirement Research at Boston College. According to the study, only one-fifth of Americans age 65 will not need long-term care services.
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