Long-term Care

How Advisors Can Broach the Delicate Topic of Long-Term Care With Clients

Helping clients understand the personal, financial, and planning components of long-term care can empower them.

Financial advisors play a key role in helping clients plan and save for retirement. But no matter how fortified a financial plan or nest egg appears, there’s a risk lurking in the background: the high cost of long-term care, an unwelcome reality which typically hits in the later years of retirement.

There’s an opportunity for advisors to add value by helping clients better understand and plan for this potentially costly financial obstacle later in life. The best way to do that is to proactively facilitate conversations with clients and their loved ones on this sensitive and stressful topic in the run-up before retirement. You don’t have to wait for clients to bring it up. The best approach is to have a plan in place long before your client or a client’s family member experiences a decline in physical or mental capacity and requires long-term care.

In fact, helping clients understand the personal, financial, and planning aspects of long-term care—and exploring care and funding options with them—can be empowering.

The problem? Many people aren’t addressing aging and the long-term care challenges it presents. One in three people say “they have not spoken to anyone” about the possibility of needing long-term care, according to a study by the Journal of Financial Planning. And just 43% of adults say they have had a “serious conversation with a loved one” about who will take care of them if they ever need help with daily activities, according to a report by KFF Health News and The New York Times.

Ignoring the reality of long-term care is a common problem
One in three people say “they have not spoken to anyone” about the possibility of needing long-term care.

Source: Journal of Financial Planning

The good news? This problem creates an opportunity for advisors to find solutions that can help clients avoid potential financial catastrophe in the later stages of their lives. Having a plan in place to address long-term care issues can go a long way towards alleviating any anxieties clients may have.

Start the long-term care discussion with a focus on education

Many clients suffer from fear and a lack of knowledge when it comes to long-term care and their ability to pay for it. Four in 10 (39%) people, for example, don’t know how they’ll fund the cost of long-term care, according to the KFF/New York Times report.

Clients’ financial angst is often amplified by the real-world reality that aging and long-term care is a multi-generational issue. A client may lose sleep not just worrying about having to pay for long-term care for themselves, but also for family members ranging from aging parents to spouses.

And that’s where advisors can assist by injecting much-needed perspective and dispelling any misconceptions related to long-term care and potential financial costs clients face.

No doubt, financial advisors can play a key role in alleviating these fears by educating clients about long-term care as part of their overall retirement plan. For example, you can assist clients in estimating costs. You can present different care options, such as hiring a home health aide or getting around-the-clock care at a nursing home. You also can address the pros and cons of paying for care via long-term care insurance or self-funding. And most importantly, you can help tailor a solution that best fits your client’s family situation and helps them avoid a catastrophic financial outcome.

Advisors can start a dialogue when clients are in their 40s or 50s, as that’s the period in their lives when they may begin to care for aging parents, want to get a head start on planning for long-term care costs, or want to secure insurance at an affordable price. Since November is Long-Term Care Awareness Month, this is a great time each year to kick off an initial conversation on the topic or to schedule an annual touch-base meeting with your clients on long-term care planning and progress to date. But it’s vital to keep the dialogue going throughout the year. So, it also makes sense to build discussions related to long-term care planning into your regular retirement planning meetings.

Helping clients get a realistic picture of the long-term care challenge

A good way to provide clients with an educated estimate as to what their long-term costs might be is to share actual real-life cost data with them. Sharing facts with clients about the actual long-term care expenses paid out of pocket by other retirees, the odds of one day needing care, the typical length of time people require care, and the options to pay for it can lessen client anxiety and help them see a path forward.

For example, you can note that even though 70% of adults who live to age 65 will require long-term care support in their lifetimes, almost half will receive some paid care, according to the U.S. Department of Health and Human Services (HHS). Many older people, the government agency notes, rely exclusively on family and unpaid caregivers. Further, it’s crucial to note that most paid care episodes are relatively short. Only 24% of older adults receive two years of paid long-term care and only 15% spend more than two years in a nursing home, according to HHS.1

And while the chance of needing paid LTC care over an extended period is slim, clients should be aware that when costs do arise, they can be substantial. For instance, the median monthly cost of a home health aide is $5,720 for 40 hours per week or $24,000 per month for 24/7 at-home care. While these numbers might cause sticker shock, it’s not what most people experience. To assuage worst-case fears, you can note that half of folks who lived beyond age 90 spent less than $5,200 in out-of-pocket health care expenses over the last two years of life—including long-term care—according to T. Rowe Price estimates based on an analysis of data from the Social Security Administration’s Health and Retirement Study. In contrast, only a small fraction (5%) spent $169,800 or more in the last two years of life.2

Once you size up the financial challenge, you can drill down and discuss ways of paying for care. Funding sources range from liquidating investment assets, getting a long-term care insurance policy to offset some of the costs, tapping health savings accounts (HSAs), setting up specific investment accounts earmarked for long-term care costs, or even selling a home.

And don’t gloss over the emotional costs. Discuss the pros and cons of aging in place and getting care from family members versus seeking care options at facilities staffed by professional health aides and medical specialists. Highlight that care provided by family members, such as adult children, can create emotional, physical, financial, and time-related stressors.

The key: stress that they have options, emphasize that there are ways to guesstimate costs, and drive home the fact that there’s a plan of attack to address the financial challenge.

Addressing the multi-generational aspects of long-term care

The financial and emotional risks associated with long-term care and its costs aren’t confined to just your client and their spouse. If a client’s aging parents aren’t financially prepared to fund a stay at a nursing home, for example, it could have a potentially debilitating impact on your client’s finances if they need to step in and assist.

Remember, long-term care is a multi-generational challenge for families. So, make sure to ask your clients how their aging parents are faring and how their other family members are doing.

More importantly, encourage discussion among family members to learn about their plans for long-term care. It’s easier to plan if you know the wishes of your loved ones before they require care. The more transparency among family members, the better. However, that’s often not the case. Six out of ten (59%) parents who think their adult children will provide their long-term care haven’t discussed that hope or expectation with them, according to a Journal of Financial Planning study.

Why adult children must inquire about aging parents’ care wishes
59% of parents who think their adult children will provide their long-term care haven’t discussed it with them.

Source: Sophia Ashebir, Alexa Balmuth, Samantha Brady, Lisa D’Ambrosio, Adam Felts, and Joseph Coughlin, 2024, “’I Haven’t Really Thought About It’: Consumer Attitudes Related to Long-Term Care,” Journal of Financial Planning 37 (2): 64–76.

Stress the importance of planning ahead and mapping out a funding plan to help alleviate stress and boost the odds of finding a financial solution that doesn’t cause irreparable financial harm to caregivers or other family members.

T. Rowe Price, of course, is here to help. We offer thought leadership on how to navigate the emotional and financial burdens of long-term care. You can gain valuable information, get access to useful statistics, and find sound planning advice by reviewing our long-term care guide, “Planning for life and long-term care in the second half of retirement."  You can also share this guide with your clients. 

Broaching the sensitive topic of aging and long-term care isn’t as fun or easy as talking about a great quarter of performance for your client’s retirement portfolio. But it can help to deepen your client relationships and add more value for your clients and their loved ones in the long run. Financial advisors can do their clients a great service by jump-starting an ongoing conversation about long-term care, educating them about care and funding options, and ensuring that they are as prepared as possible to navigate the emotional and financial uncertainties that inevitably accompany a longer retirement and life.

RELATED RESOURCES

The Real Costs of Retiree Health Care

Help your clients understand the real costs of retiree health care and take action on how to prepare.

https://aspe.hhs.gov/reports/what-lifetime-risk-needing-receiving-long-term-services-supports
Note that individuals already covered by Medicaid upon entering their final two years of life were excluded from our analysis (because they were not paying out of pocket).

202411-4004009

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