Patrick McFawn

Tuesday, 24 May 2005 07:21

Healthy choices

Like it or not, Social Security is forcing us to become more responsible for our financial futures.

Years ago, many retired workers were privileged with monthly pension checks and Social Security benefits, which paid for their cost-of-living needs. Today, few employers offer pension plans, and the future of the Social Security system as we know it is in jeopardy.

As a result, the burden of accumulating enough money during our working years to carry us through retirement has been transferred to individuals. Considering the higher standard of living most enjoy, and the fact that life expectancy continues to increase, this is no easy task.

While most people develop long-term financial plans and goals for retirement, few save with long-term care in mind. When they must turn to long-term care due to an illness or disability, the cost can destroy the savings they worked so hard to achieve, dealing a devastating blow to their overall financial picture.

Long-term care is becoming more of a reality for the aging population today. The odds of requiring some form of long-term care increase with age. Sixty percent of those who receive long-term care are over the age of 65, according to the U.S. General Accounting Office. Approximately 50 percent of this population will spend some time in a nursing home during their lifetime, reports the Health Insurance Association of America.

What's more, long-term care isn't just for "old folks," nor is it dedicated solely to nursing homes. Forty percent of those who receive care are ages 18 to 64, according to the U.S. General Accounting Office. And an increasing percentage of those are receiving care in their own homes.

The national average cost for a nursing home stay is $55,000 per year -- for one person. Married couples can double that number. Of course, cost depends on location, and nursing home care rates range from $72 per day in Mississippi to $202 per day in Connecticut. Michigan strikes a median at $127 per day, or $46,355 annually, according to Kiplinger market research figures.

As we collectively celebrate more birthdays and, in effect, check into health care and nursing facilities at higher rates, it's safe to assume that these costs will increase proportionally, perhaps faster than the national average inflation rate.

How can you plan for long-term care and protect your financial future? Here are some practical ways to fund care.

* Accept the responsibility of paying for it yourself, hoping "this will never happen to me."

* Rely on the government Medicaid system to pay for long-term care. Just remember, Medicaid coverage is only available if you spend down your own assets to the state-required level ($2,000 in Michigan). Even then, it may not cover home care, where many people prefer to stay when receiving care.

* Hope your children will pay for it.

* Transfer long-term care costs and responsibilities to an insurance company by securing long-term care insurance.

For many people, consulting a professional to help them manage their income and save for the future is the most cost-effective way to protect their assets and provide for the transfer of wealth to future generations. Effective long-term care planning may be one of the primary wealth preservation and transfer tools today.

Give yourself peace of mind by taking steps to protect your hard-earned assets now and your independence in the future.

Patrick L. McFawn, Certified Public Accountant and Certified Financial Planner, is director of Doeren Mayhew Financial Services LLC. Doeren Mayhew Financial Services LLC is an affiliate of Doeren Mayhew, located in Troy, Mich., providing a wide range of professional services to middle-market companies. Reach McFawn at or (248) 244-3178.