But that aside, almost as certain as death and taxes is the likelihood that sometime during our lives we will be either caregivers or care recipients – or both. The problem is that it’s difficult to predict when and for how long we will be receiving or providing care or the level of care.

This challenge is especially problematic for women. They are much more likely to be thrust into a caregiving role and, if married to men, are much more likely to outlive them both because women, on average, live longer than men and because in heterosexual couples they are likely to be younger. As a result, when women do need care, they are less likely to have a spouse available to step in, which is one of the reasons that more than two-thirds of residents of nursing homes are women.

Population-Wide Likelihood of Needing Care

It’s much easier to predict the need for care on a population basis than individually, but those population numbers can inform individual prospects of needing care. Researchers at the Center for Retirement Research at Boston College have crunched the numbers of various studies and in their 2021 report, “What Level of Long-Term Care Services and Supports Do Retirees Need?,” estimate overall long-term care needs. A recent update of these data show that only about a fifth of retirees will need no assistance at all during their lives and a fifth will need extensive services. The remaining 60 percent of seniors will have either low (25 percent) or moderate care needs (37 percent). 

But what do these categories mean? The researchers, Anek Belbase, Anqi Chen, and Alicia H. Munnell, look at both the level and the duration of care. In terms of level of care, they define low intensity as needing assistance with one “instrumental” activity of daily living (e.g., money management, cooking, shopping); moderate as requiring assistance with one activity of daily living (e.g., bathing, toileting, eating); and high as having dementia or requiring assistance with two or more activities of daily living.

In terms of length of care needs, they define short as up to a year, medium as one to three years, and long-term as more than three years. The result is shown in Table 1.

Filling in the percentages yields Table 2.

All of these percentages apply to individuals at age 65. Again, these figures are very useful for population-wide predictions, but less useful for individuals planning for their own futures.

Predictive Factors

However, the statistics revealed individual attributes that offer some useful insights. Looking at whether a 65-year-old is married is somewhat predictive of being less likely to require extensive care later in their lives. For instance, married women are more likely to need no assistance and less likely to have severe needs than unmarried women.  Those with more education, White individuals, and those in better health are similarly more likely to be in better shape in terms of their care needs.

Extrapolating from the Population Level to the Individual

Combining all these attributes, clearly a Black unmarried woman who did not graduate from high school and is in poor health at age 65 is much more likely to need extensive long-term care than a White married man with a college degree who reports being in good health at the same age. Unfortunately, these attributes are almost exactly misaligned with the ability to pay for care.

It should be possible to create a calculator for individuals to use to get some idea of their own likelihood of needing care. If it were combined with estimates of the cost of care in their region, it could be used in financial planning to provide some idea of how much money they can anticipate needing to spend. Such a calculator would not be conclusive since costs are largely determined by the setting where care is provided — home, assisted living, or nursing home — and whether family members can provide unpaid care, but it would offer more guidance than appears to be available anywhere today.

For more from Harry Margolis, check out his Risking Old Age in America blog and podcast.  He also answers consumer estate planning questions at AskHarry.info.  To stay current on the Squared Away blog, join our free email list.  You’ll receive just one email each week.

Sudders identified that Massachusetts has an older inhabitants than most states and by 2050 virtually a 3rd of individuals can be 65+. Because of this, she and Governor Charlie Baker created a Council to Tackle Ageing in Massachusetts to get the whole cupboard to consider learn how to turn into an age-friendly state. The Fee’s strategy was to induce each group to plan regionally on learn how to assist their residents age in place.

Lack of Continuum of Housing Choices

One of many state’s greatest challenges is housing. Not solely is there a scarcity generally, however there are gaps within the continuum of housing for older residents to have the ability to transfer from their properties however keep of their communities. Two initiatives throughout Governor Baker’s tenure aimed to assist handle this subject: 1) the MBTA Communities Regulation that requires cities in jap Massachusetts which might be a part of the regional mass transit system to release zoning for multifamily housing; and a pair of) the requirement that each one cities permit the creation of accent dwelling items (ADUs), which can be utilized to accommodate an growing old guardian transferring in with their grownup kids. In addition they modified the constructing code to make new housing extra accessible to older residents and others with disabilities.

A current Boston Globe article describes how the dearth of different housing contributes to child boomers staying within the homes the place they raised their households, making a scarcity of housing for youthful households.

Sudders additionally defined how assisted dwelling in Massachusetts is a really completely different mannequin from many different states. Massachusetts has at all times seen assisted dwelling as a housing choice and distinguished it from nursing properties, which give medical care. Sudders identified that “you possibly can’t actually have a hospital mattress in assisted dwelling right here.”

“We should always have a continuum and never a lot these vivid traces,” she mentioned. “In case you are in assisted dwelling and your care wants enhance, it is best to have the ability to obtain that care the place you might be till and except you in the end do want a nursing house degree of care.”

Studying from the Pandemic

Sudders led the state’s COVID-19 Command Middle. It’s now been 5 years for the reason that first “index” case in Massachusetts – the primary case the place you possibly can not hint the an infection indicating group unfold. It hit institutional care particularly and tragically laborious.

She cited a number of early developments that impeded the state’s response:

the World Well being Group mentioned COVID was not an airborne virus;

it took some time to study that you possibly can be an asymptomatic provider;

testing capability and facemasks have been very restricted;

it wasn’t instantly clear that COVID disproportionately affected older adults;

the density of nursing properties facilitated the unfold of the an infection; and

the state realized that they lacked the testing capability to establish who was contaminated in nursing properties, impeding efforts to segregate these with the virus.

Sudders additionally listed a number of the classes discovered from the pandemic and steps the state has taken to raised put together for the subsequent one:

First, we have to cut back density as a lot as attainable in nursing properties, prisons, and group properties.

Second, our provide chain vulnerability was uncovered. A lot of producers stepped up on the time to create robes, reagents, and facemasks; and so they have the power to step that again up rapidly if obligatory sooner or later.

Third, emergency preparedness plans can’t simply sit on a shelf. They have to be repeatedly reviewed and up to date. Now our public well being warehouse has been utterly automated.

Bettering Nursing Properties

The state additionally elevated monetary compensation to nursing properties with strings hooked up, together with: no extra four-person rooms, elevated nursing-resident ratio, elevated oversight together with closing admissions in the event that they discover issues, and revising the function of inspectors. It’s now simpler to put nursing properties in receivership, but it surely nonetheless requires going to courtroom.

These adjustments have resulted in fewer nursing house beds within the state, however Sudders mentioned that Massachusetts is making it simpler to age in the neighborhood, so her hope is {that a} smaller share of seniors would require nursing house care going ahead and that those that do won’t want it for as lengthy.

“I’d wish to assume that [we could] present well being take care of folks in the neighborhood so that individuals can keep their independence for so long as attainable and never want an institutional degree of care maybe ever or not till the very finish a part of life. It’s about constructing capability and selection and never being depending on one mannequin of care.”

What You Can Do

Sudders beneficial that each one seniors actively plan their subsequent housing chapter and ensure their properties are adaptable in the event that they expertise mobility points. Don’t look ahead to a disaster.

“And have the dialog along with your family members. I didn’t simply say household, there’s the household you select. It’s not morbid; it’s about having management over your life. It’s life-affirming.”

For extra from Harry Margolis, try his Risking Outdated Age in America weblog and podcast.  He additionally solutions client property planning questions at AskHarry.information.  To remain present on the Squared Away weblog, be a part of our free e-mail listing.  You’ll obtain only one e-mail every week.

Evaluating Japan and the USA

It’s value having a look at Japan’s demographics since they might paint an image of what we and different developed nations will face in coming years. Their inhabitants in the present day has an estimated median age of 49.8 years in comparison with 38.5 years in the USA. Japan has a fertility charge of simply 1.2 births per girl and a low proportion of ladies presently of their childbearing years. The U.S. fertility charge is 1.6 births per girl, nonetheless nicely beneath the substitute charge of two.1. Not surprisingly, Japan’s complete inhabitants has already been slowly declining, and the tempo of decline is prone to speed up in coming years.

One purpose that Japan is a lot older than the USA is that the Japanese stay longer. Their common life expectancy at beginning is 84.9 years as in contrast with 79.5 years in the USA. (Most of those statistics are from Worldometer.)

Many concern a demographic collapse in Japan if present tendencies proceed. In response to one commentator: “The Japanese authorities tasks that, if this pattern isn’t reversed, the nation’s present 125 million inhabitants will drop to 100 million round 2050…The demographic downward curve is so steep that it threatens the energy of the nation’s financial future.”

What About the USA?

Whereas the USA has seen a steep drop in fertility over time, the excellent news a part of this pattern is that there are numerous fewer teen births than in prior years (see Determine 2). Teen births have dropped by a whopping 73 p.c from the 1990 degree. Throughout the identical interval, the variety of births to ladies over 40 have tripled, although that also doesn’t quantity to the majority of latest infants, nearly 4 p.c of all births.

In response to Jennifer D. Sciubba, President of the Inhabitants Reference Bureau, we may even see the variety of births improve considerably in coming years as a result of “the youngest Millennial ladies at the moment are 29 years previous, so prime reproductive years. As a bunch, Millennials are a lot bigger than the Gen X ladies now exiting their reproductive years, so which means extra potential moms.”

Maintain the Immigrants Coming

Nonetheless, the U.S. inhabitants will proceed growing old; and this pattern will probably be exacerbated if we restrict immigration. So, what occurs if we reduce off the immigration spigot? The Census Bureau runs inhabitants projections primarily based on numerous immigration assumptions. Their center projection foresees the U.S. inhabitants peaking at about 370 million in 2080, earlier than declining barely by 2100. It tasks that with excessive ranges of immigration the overall inhabitants may attain 435 million by 2100, however {that a} low-immigration situation would result in our inhabitants declining to 319 million by 2100.

Elon Musk has steered that the answer is for everybody to have extra kids, or no less than for individuals who stay in developed nations to observe his instance. However that seems to buck the pattern of ladies having fewer kids as they acquire schooling and monetary stability.

Provided that the populations of most African international locations and India proceed to develop at nice charges, and plenty of components of the world are affected by the results of local weather change, wouldn’t it’s quite a bit simpler to easily preserve the circulation of immigrants coming? They definitely contribute quite a bit to the nation. Musk himself is one instance.

For extra from Harry Margolis, try his Risking Outdated Age in America weblog and podcast.  He additionally solutions client property planning questions at AskHarry.data.  To remain present on the Squared Away weblog, be a part of our free electronic mail listing.  You’ll obtain only one electronic mail every week.

Even the best-laid plans can go awry.  Individuals face many hurdles to adequate planning for retirement and, even when precautions are taken, they may be overwhelmed by a big enough shock.  In particular, large medical and long-term care (LTC) spending shocks can devastate retirees’ hard-won finances.  What, then, do individuals and households do when first-line plans to deal with healthcare costs fail?  This paper studies the consequences of large out-of-pocket (OOP) medical and LTC shocks on retired households to explore this question, focusing on the Medicare-eligible population of over 65-year-olds.  A large shock represents a failure of insurance to insulate the household from the healthcare expenditure, either because of lack of coverage (typical for LTC) or because of cost-sharing in existing insurance (typical in health insurance).

The analysis has two parts.  First, it presents results from a recent survey dealing with healthcare shocks in retirement.  This paper focuses on a small selection of questions from the survey, demonstrating what individuals believe their fallback options are after a healthcare shock.  The analysis then turns to the Health and Retirement Study (HRS), a large longitudinal survey, to estimate how households actually fare following a large healthcare expenditure.  We examine the years 2002-2016.  Throughout, we use “healthcare” to refer to any health-related costs, whether they involve periodic medical care or long-term care.

A medical shock is defined as an expenditure in the top ten percent of medical OOP expenses in a given year.  These costs are comprised of payments to doctors, hospitals, dentists, and for outpatient surgery and prescription drugs.  Because OOP LTC spending is relatively rare, an LTC shock is defined as having any positive spending on nursing home or home care.  To analyze the effects of such shocks, the analysis must contend with the fact that households bearing such large OOP costs are not similar to households spared these shocks.  In response, we follow the methodology described in Fadlon and Nielsen (2021), comparing households that experience a shock in a given year to households that will experience the same shock four years in the future.  The assumption here is that the exact timing of the shock is random, even if the type of households that experience such shocks is not.  The approach yields a difference-in-differences estimate of the causal effects of such shocks.

Briefly, we find that LTC shocks lead to drawdown of home equity; reduction in bequest expectations; and, above all, increased reliance on Medicaid.  In contrast, large medical shocks seem to be borne by individuals without severely impacting their retirement trajectories; the effect of such shocks is limited to reductions in expected bequests.  These patterns match individual perceptions of relying on Medicaid in case of large shocks; however, individuals seem not to anticipate the need for drawing down home equity.  Overall, results point to medical shocks being relatively well-insured while individuals are still exposed to meaningful LTC risk.  The results are also consistent with prior work showing that bequests may serve a double role as desirable transfers to the next generation if possible, but also as a cushion to self-insure LTC shocks if necessary (Poterba, Venti, and Wise 2011 and Lockwood 2018).

An issue brief recently published by the Center for Retirement Research at Boston College examines these costs, policies that can support family caregivers, and their preferences as expressed in focus groups. Here are some of its findings:

In 2021, there were about 38 million family caregivers in the United States who are estimated to have provided 36 billion hours of assistance to their family members.

Racial Disparities

White caregivers are more likely to be spouses and are older than Black or Hispanic caregivers, who are more likely to be the children or grandchildren of the people for whom they are caring. While 56 percent of White caregivers are ages 62+, only 37 percent of Black and 30 percent of Hispanic caregivers are this age. Just a fifth of White caregivers are under age 50 as compared to a third of Black caregivers and just over 40 percent of Hispanic caregivers. Non-White caregivers are also more likely to provide more hours of care per week.

Not surprisingly, the younger age and greater hours of caregiving for non-White caregivers have a greater impact on their ability to maintain their employment, which has ripple effects on their current and future finances as they earn less and contribute less to Social Security when working.

Limited Assistance

In terms of existing financial support, family caregivers can claim a Child and Dependent Care Tax Credit for out-of-pocket expenses of up to $3,000 for one dependent and $6,000 for two or more dependents. This tax break has limited utility for several reasons: the family member must qualify as a dependent; the credit is only for out-of-pocket expenses rather than compensation for the time and effort of care; and it’s non-refundable, meaning it’s not available to lower-income caregivers who have no federal income tax obligation.

The Family and Medical Leave Act (FMLA) provides up to 12 weeks of unpaid leave to workers who need to take time off to provide care. The lack of payment undermines the utility of this benefit for most workers. Fourteen states offer some form of paid family leave with the terms varying from state to state.

What Caregivers Want

Researchers at the Center for Retirement Research at Boston College and the University of Massachusetts Boston conducted focus groups of family caregivers to learn what public policies would most help them. According to their report, the participants expressed great interest in being paid for caregiving and less for paid leave from work or tax credits. Many of them were not working, so would not benefit from paid leave, and proposals for only 12 weeks of paid leave were seen as too short to be of much utility.

Few of the caregivers were interested in suggestions to give them credits toward their future Social Security because this policy idea focuses on the future rather than their immediate financial needs. Some were interested in proposals for paid respite care to provide a much-needed break but they expressed concern about the quality of care that would be provided by those stepping in.

After direct payments, the greatest favorable response was for reimbursement for costs that the caregivers incur related to the support they provide their family members.

While these preferences were consistent among all participants, non-Whites favored direct payments and cost reimbursement to an even greater degree than White caregivers. This discrepancy no doubt reflects the greater impact on their employment due to their average younger age as cited above.

The ability of family members to provide necessary care to both older and younger disabled adults relieves pressure on the overburdened and fractured care network of nursing homes, assisted living facilities and home care providers, as well as public budgets, especially Medicaid. The pressure on this system will grow as the need for elder care doubles between 2030 and 2050 when the baby boomers reach their later years.

It would make sense to do what we can to better support family caregivers. This study makes it clear that the best way to do so is to provide financial assistance to family members, both in terms of compensation for their caregiving work and reimbursement for out-of-pocket costs.

For more from Harry Margolis, check out his Risking Old Age in America blog and podcast.  He also answers consumer estate planning questions at AskHarry.info.  To stay current on the Squared Away blog, join our free email list.  You’ll receive just one email each week.