Tapping Your Own Retirement Funds to Care for Parents Is Not a Good Idea
Q: While my husband and I are working to ensure a comfortable retirement for ourselves, I’m worried about how to help my 82-year-old father enjoy his final years. I’m scared about what will happen if he requires assisted living or, worse yet, nursing-home care. My mother’s lingering death from Alzheimer’s years ago took much of my father’s retirement savings. Should I consider borrowing against my retirement accounts if money is needed for Dad’s care, then hope the sale of his home could reimburse me? Is borrowing against such accounts ever wise? I want to keep my father safe and well-cared for, but I’m trying to find legal, ethical ways to preserve financial security for my husband’s and my later years.
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A: You are a good daughter and your father is lucky that you care so much about his well-being. But please think carefully before you put your retirement savings at risk.
Ideally, all of us would have either enough money or long-term care insurance to provide in-home care so that we would never have to go to a nursing home. But many of us will not be in that fortunate position. Your father’s resources already have been depleted and he is probably too old for long-term care insurance to make much sense; the premiums would be prohibitively high at his age.
Many families in your situation decide that their parents’ resources will be used to provide either in-home care or placement in a good nursing home for as long as possible. Once those resources are exhausted, the parent would qualify for Medicaid, the government health program for the poor. (In California, the program is known as Medi-Cal.) The program does not cover in-home care, so your father would need to already be in or be transferred to a facility that accepts Medicaid/Medi-Cal.
If your father does need government help, the state could make a claim against his house, which would probably require that it be sold after his death to reimburse the government for his care.
No one wants to be indigent and in a nursing home. If your father needs such care, however, you can help ensure that he gets quality attention by carefully researching available facilities and then--once your father is admitted--by being a constant and cheerful presence in his life. Elder-care experts will tell you there’s nothing like an attentive family to keep a nursing home on its toes.
A book that can help you is “Beat the Nursing Home Trap: A Consumer’s Guide to Assisted Living & Long-Term Care” by Joseph L. Matthews ($21.95, Nolo.com). In addition to the alternative-care strategies referred to in its title, this book offers great advice about selecting a nursing home. Nolo.com’s Web site (https://www.nolo.com) also offers information about Medicare, Medicaid and long-term care.
You could cash in your retirement savings, rather than use the resources that are available and designed for people in your father’s position. You generally would have to take out about twice as much as you actually need, because taxes and penalties will whittle down the total available to give.
If you did tap your funds, you would risk someday being in exactly the same spot as your father--broke and needing care. You understand how difficult it is to worry about a parent, and you probably wouldn’t want to pass on that particular burden to your own children.
2nd Opinion on Annuities Tricky
Q: I’m a longtime insurance agent who hears a lot of incorrect or incomplete information about variable annuities, but you do a very fair job of explaining the pros and cons. The only thing I’d take exception to is the suggestion, by elder-law attorney Ed Long, that a second opinion should be required before an annuity could be sold. In theory, that’s a good idea, but in reality the consumer is likely to end up with another person with different, incomplete information. Ultimately (as you always point out), we have to take responsibility for going through the pain of learning about what we’re doing. People want someone else to make the decision for them instead of making their own.
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A: Ed Long suggested a second opinion for annuity sales to people over age 60 because he, and others, see so much abuse in that area. The same day you sent your e-mail, in fact, I received a handwritten letter from an 89-year-old man who’d been sold two variable annuities, one by his bank and another by a seminar promoter. It’s rather unlikely he will live long enough for the tax-deferred benefits of the annuities to outweigh their substantial extra costs.
You’re right that there are far too few qualified, objective people to make getting a second opinion a requirement for all annuity sales. Instead, consumers should be encouraged to learn all they can; one place to start is the insurance primer at https://www.latimes.com/insure101.
You’re also right that we’re responsible for our own choices. Still, seniors can be incredibly vulnerable in financial matters, which makes it even more important that they get a second opinion. Older people would be wise to consult a fee-only financial planner or an elder-law attorney before investing in an annuity. If they have enough money to invest, they can spend a little more to make sure the annuity is a good fit for their situation.
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Liz Pulliam Weston is a personal finance writer for The Times and a graduate of the personal financial planning certificate program at UC Irvine. Questions can be sent to her at liz.pulliam@latimes.com or mailed to her in care of Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053. She regrets that she cannot respond personally to queries. For past Money Talk questions and answers, visit The Times’ Web site at https://www.latimes.com/moneytalk.
