The retirement crises debate. A recent Wall Street Journal article pitted opposing parties in a debate as to whether America has a retirement crisis. Obviously one side said we do have a retirement crisis as too many people save too little money, and the counterpoint indicated that we don’t have such a crisis because older individuals spend less money than while they are working and raising children. The implication being that people won’t actually need more money in retirement.
One aspect that neither party discussed in the debate was the cost of long term care. While acknowledging that we are generally living longer lives, there was no discussion of covering the cost of residing at an assisted living facility, an adult family home or paying for in home care. This would seem to be a significant oversight as studies show that one in four individuals over age 65 will develop some form of dementia related ailment. Those number rise to one out of every two individuals over age 85.
The reality would seem to be there is no retirement crisis, until there is one. If you live at home and the mortgage is paid, the car is paid, your debts are minimal and kids are gone, a monthly Social Security check of $2,000 and an extra $1,000 of IRA or annuity income is probably sufficient. However, when you all of a sudden have to move to assisted living or an adult family home at monthly costs ranging between $3,000 and $10,000 per month, you see there is a scary income shortfall.
Many people will look to a reverse mortgage to solve their problem. That may be fine, but you have to reside in your home. If that is not possible the reverse mortgage is not a viable option. The next step is usually to sell the house and hope the money lasts. There are better ways to address this all-to-common situation. Advance planning that fuses legal asset protection with straight-forward financial strategies can provide the answers that every family desires when planning for retirement.