Rapid City financial advisor Rick Kahler shares thoughts on why we put off planning for long-term care.
An essential component of planning for retirement and old age is building financial resources to pay for long-term care. Yet having enough money is not automatically a guarantee of getting the best care you need when you need it.
The biggest problem is availability. Independent or assisted living facilities often have waiting lists that are months or years long. If you need a unit immediately, you may have to settle for the first one available. It may be miles away, expensive, poorly staffed, or not well suited to your needs.
Needing LTC is largely not an unknown. Chances are high you will need it (as suggested by the photo above taken by the U.S. Dept. of Health and Human Services). According to the Administration for Community Living (ACL), about 70% of people who turn 65 today will need some type of long-term care in their remaining years. This includes about 20% who will need nursing home care and 50% who will need care in an assisted living facility or in their own home.
What is unknown is the timing. Typically, the need for a long-term care facility is triggered by a crisis such as a stroke, fall, or heart attack. Even gradual health declines, when ignored or not dealt with proactively, can become crises. These can include cognitive decline like Alzheimer's disease or dementia, sight loss, hearing loss, mobility issues, and social isolation. It is common to put off addressing these until a crisis point is reached.
Some of the cognitive biases that contribute to our reluctance to take action are:
Loss aversion bias: This leads us to prioritize avoiding losses over seeking equivalent gains. In contemplating a move to an LTC facility, the fear of losing one's current lifestyle and autonomy might lead to delaying the decision until a crisis forces it.
Procrastination bias: This results in deferring actions that are uncomfortable or difficult. Delays in transitioning to an LTC facility might be attributed to the emotional challenges tied to selling a home, parting with belongings, and disrupting daily routines.
Optimism bias: This causes us to overestimate our chances of success and underestimate the potential for failure. Optimism might lead us to believe that our health will improve or that the need for care is not as pressing as it appears.
Overcoming unconscious biases like these requires some deep emotional work. Citing facts is rarely enough to motivate someone to go into action. One suggestion, which may seem counterintuitive, is to work around the biases by taking some steps early, when the need for care may feel more like a distant possibility rather than a probability looming just around the corner.
Seek financial planning advice to help you build adequate savings, as long-term care can be costly.
Explore long-term care insurance, which can offset expenses but comes with eligibility and cost considerations.
Assess your cognitive and physical abilities every few years. Many financial planners offer such evaluations. You can also find assessments online, though be aware that many of them are promotional.
Research the various long-term care options in your community.
Enhance your chances of securing your preferred choice of LTC facilities when you need it by signing up for waitlists. For instance, an excellent facility in my town offers independent living, assisted living, and skilled nursing care. The waiting period, held with a refundable deposit of $6000, can be six months to five years. I got on their waitlist five years ago, though I hope not to need a unit for another 10 to 20 years.
Accepting that long-term care will eventually be necessary is one step toward preparing emotionally to accept and arrange for that care. Overcoming biases by starting early can pave the way for a smoother transition when the time arrives.
Rick Kahler, CFP, is a fee-only financial planner and financial therapist with a nationwide practice, Kahler Financial Group, based in Rapid City. His co-authored books include Coupleship Inc. and The Financial Wisdom of Ebenezer Scrooge.
