"Enough" depends on many assumptions, including life expectancy, rate of return on investments, inflation rate, expected lifestyle, medical and general expenses during retirement, and assets such as life insurance benefits to provide for surviving dependents.
Another "enough" factor is the fact that the longer you live, the more likely you are to need long-term care. As such, retirement funding estimates could be grossly inadequate if possible long-term care is not considered in the calculations.
Paying for the costs
Medicare, the primary health care program for retirees, was not designed to address long-term care and nursing home needs. Medicare only pays for skilled or rehabilitative care , not for custodial care. In most cases, Medicare provides coverage only for the first 100 days of care, and then only if certain conditions are met.
Medicaid, a federal and state program, will pay for custodial care primarily provided in nursing homes, but only for the financially destitute. Spending down assets in order to become eligible for Medicaid is one planning strategy that could backfire. In addition to relinquishing your assets, you're left without much say in the type of the care you receive and where you receive it.
The reality is that for the most part, consumers are forced to pay privately for their care. Consequently, retirement plan assets are diverted from daily living activities to support the significant expense.
According to the official Web site of the Federal Long-Term Care insurance program (www.ltcfeds.com), these are the national average annual costs.
- $52,000 for a semi-private room in a nursing home; estimated cost for 2030 is $190,600
- $25,000 for an assisted living facility (in 2000); estimated cost of $109,300 in 2030
- $20,000 for home care ($18 per hour); estimated cost is $68,000 in 2030
Few will have saved enough to pay for these services. Since the primary source of retirees' liquid assets is qualified accounts such as 401(k)s and IRAs, depletion is accelerated by the premature withdrawal (loss of future earnings) and premature payment of income taxes due. The impact of incurring these additional costs earlier in the retirement phase needs to be recognized in the planning process.
The role of long-term care insurance
The inclusion of long-term care insurance may be a cost-effective option when planning for a possible disability created by living a long life. Besides enabling you to keep your retirement portfolio and other assets intact for their intended purposes, insurance can help keep the family together and effectively preserve your dignity in the process.
Long-term care insurance does not replace the need for family involvement in providing care. Rather, it provides the funds to pay professionals to handle the toughest tasks, allowing the family to provide better care for a longer time in the home.
A great deal of uncertainty surrounds the long-term care insurance industry, mostly because these policies are relatively new to the market. The insurance industry has little experience to draw upon for accurate estimates and trends on the costs, frequency and duration of claims. Given that a baby boomer turns 50 every eight seconds, the uncertainty of the potential costs is growing exponentially. For these reasons, several companies have exited the market or have chosen to avoid long-term care exposures completely.
To buy or not to buy will depend on your answer to the question, "Should I become incapacitated, who do I want to take care of me and where do I want to be?" The sense of urgency is greater if there is a family history of a disabling illness such as diabetes, arthritis or Alzheimer's.
Brenda C. Dunn, CFP, CLTC, CSA, LUTCF, is an associate of National Financial Services Group (www.nationalfinancialservicesgroup.com). She focuses on formulating and implementing strategies to help protect and enhance assets in an effort to secure financial success. Reach her at (770) 512-5144 or firstname.lastname@example.org.
The increasing importance of leadership across business organizations was highlighted in an April 2004 survey, "AMA 2004 Importance of Leadership Survey" by the American Management Association, which found that by a margin of nearly four to one, employees have increased the time spent on leadership functions.
The reasons for the increase focused on competitiveness, decentralized decision-making, value and generational differences, the complexity of organizations and globalization.
Yet determining the key leadership traits on which training should focus has not been easy. Here is some insight into this issue to assist executive and corporate educators and trainers in establishing a strong leadership training program.
What do employees look for in a leader?
Not financial acumen. Not vision. Not creativity. What employees want most from their leaders are basic principles in practice such as honesty, integrity, ethics and caring, according to the results of a survey conducted by Right Management Consultants, the world's largest career transition and organizational consulting firm. Right asked 570 full-time, white-collar employees in the United States, "What is the most important trait or attribute that the leader of your company should possess?"
"Employees today are looking for strength of character in their leaders," said Chris Pierce-Cooke, worldwide director of Right's Organizational Consulting practice. "They want to shake off the hangover of the last several years' corporate scandals and financial sleight of hand and be reassured that their leaders are honest, ethical and caring individuals."
Pierce-Cooke notes an irony in the results of the study.
"Employees are confronted with continued layoffs, a spotty recovery and three years of stock market declines. But they are not looking for leaders with a magic wand or a quick fix.
"Instead, they seem to be yearning for fundamental leadership principles, lessons on honesty and goodness that they were more likely to have learned in elementary school than in business or law school."
Survey respondents cited 28 attributes they felt were most important for their leaders to possess. The top five are below, with the percentage of respondents who mentioned them as the first or second most important characteristic.
1. Honesty (24 percent)
2. Integrity/morals/ethics (16 percent)
3. Caring/compassion (7 percent)
4. Fairness (6.5 percent)
5. Good relationships with employees, including approachability and listening skills (6 percent)
These traits were generally consistent between male and female, as well as white and black respondents. One significant difference was seen between two age groups. Honesty was mentioned as the top trait by 38 percent of 55- to 64-year-olds versus 16 percent of the 18- to 34-year-old group.
The bottom five attributes, including some traditionally associated with strong and well-respected leaders, were:
24. Creativity (1.2 percent)
25. Decisiveness (0.8 percent)
26. Flexibility (0.6 percent)
27. Good personality/sense of humor (0.5 percent)
28. Attention to detail (0.4 percent)
"I don't believe that employees are disregarding the need for such things as creativity and decisiveness," said Pierce-Cooke. "But they are saying that CEO character is critical, as is the ethical tone he or she sets for the organization. This study has important implications for companies when it comes to both hiring and developing leaders.
"The ideal leader will already have an internal moral compass that is guided by ethics and caring. Companies need to select those individuals carefully, and then ensure their internal culture is one that nurtures and rewards that type of leadership."
Chuck Rumford is director of corporate programs for West Chester University's College of Business and Public Affairs. West Chester University serves the educational and training needs of students and corporate clients from its off-campus, state-of-the-art Graduate Business Center. For more information on Corporate Programs, visit training.btcwcu.org or call (610) 425-2695. Anne Dunn is vice president, client services consulting for Right Management Consultants (www.right.com) and a member of the advisory board member for West Chester University's College of Business and Public Affairs. Reach her at (610) 251-9250.