Fix My Portfolio: My mom has $550,000 and dementia, and I’m worried what happens when her money runs out

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About seven years ago my mom was diagnosed with aphasia which then progressed fairly quickly to frontotemporal dementia. She was around 70 at the time of the initial diagnosis. We were advised by her doctor to move her into an assisted-living facility, which we did. I was made power of attorney years earlier but didn’t know that she had purchased a long-term care policy in 2007. This was a great relief to us as it would cover her stay in the facility. We were also able to sell her house and invest that money.

Last year she moved from assisted living to memory care as her condition deteriorated. We are now faced with her insurance money running out in about a year and a half. Thankfully she has about $550,000 in investments from the sale of her house which at the current rate, gets her about 10 more years in this facility. And while this situation is very sad and stressful for us, we feel very lucky for her financial situation.

My question is, if my mom outlives the insurance and investment money, what are our options? Neither myself nor my brother are equipped to properly care for someone with her condition. We have looked at cheaper facilities but honestly, they are pretty bad. And the thought of her having to go into a subpar, state-run facility is not something we’d like to happen, if that’s even possible.

Thanks for your advice,

Worried Son

Dear Worried Son, 

One thing that is very clear from your letter is that you and your brother love your mom and want to take care of her in the best way possible. Your question is actually less about money than it is about guilt. Most people in your situation aren’t sure that they are doing the right thing about anything. It’s a lot of responsibility. Plus, we’re typically much more careful about how we care for others than we are about our own future plans. 

And yes, you are lucky. Some 80% of people aged 60 and over do not have the financial resources to cover long-term care services or another financial shock, according to a recent study from the National Council on Aging

“Very few people plan like this. I want this guy to be my caregiver,” says Joy Loverde, an eldercare expert and author of “The Complete Eldercare Planner.”  

But that doesn’t negate your anxiety. It’s hard to watch the insurance clock tick away and the bank account balances go down. But that is what those resources are for and you’re doing the right thing. To be honest, and without getting into actuarial talk that will make you sad, 10 years is an eternity of money. 

Can mom stay where she is? 

The first practical question you raise is about your mom’s housing situation. If your mom is happy in her memory care facility now and you like it, then explore options for her to stay there. For now, the long-term-care insurance is picking up the cost, then you can pay out-of-pocket for however long the money lasts. 

When you get toward the end of those assets, your mom can go through the process to qualify for Medicaid, which covers the cost of care, but as you say, not all places are equal. One thing to do now is reach out to a Medicaid specialist — like your state benefits office, AARP or the National Council on Aging — and see what your mom needs to do in order to qualify and be ready with the paperwork when the time comes. Another proactive move is to see if the facility she’s in now has Medicaid-designated beds, and if they will they work with you to transition your mother to that payment schedule when the time comes. “Some places will work with you, some won’t,” says Loverde. 

You may also find a surprising resource in your mom’s insurance carrier.  “Long-term-care insurance people know about other options besides insurance that you may be able to access,” says Loverde.

How long will the money last? 

Beyond help with the facility, you’ll just want to make sure money is available to keep making the payments. That brings us to the trickier part of how you maximize your mother’s savings. For that, you should see a financial planner and an estate attorney. There may be ways to structure the money so that it lasts longer and is excluded from Medicaid formulations. You’ll want a fiduciary who is looking out for your best interest for this, because otherwise, you’re at risk of people trying to sell you a lot of complicated annuities. 

You can also play with the numbers yourself. One of my favorite online calculators is a savings-distributions calculator that shows you how long a sum of money will last over time, given how much you need to take out. It’s not simple division, because the money grows at the same time you spend it. 

For instance, if you need your mom’s $550,000 to last 10 years, that works out to roughly $6,000 a month. That’s assuming it grows at about 5%, which means you keep most of it in a money market or Treasury product for now to be safe. If your mom gets Social Security benefits, that could be enough to cover the facility for a while.

You have to play around with the numbers to fit your situation. She may need less now, given the insurance payments, and more later on. She may also have medical emergencies or you may develop the need for private supplemental care that that facility does not provide. If she needs more, like $12,000 a month, the money is only going to last about four years. 

The math might help you deal with the anxiety of spending down assets. “The only way I have counseled people about that guilt thing — which shows up in every way, shape and form — is to tell them to talk to financial professionals. They have such a bottom-line approach and they have seen it all and done it all. It helps you to understand what’s really going on here,” Loverde says. 

Good luck with your mom! Most of all, enjoy the time you have together and trust that you’ve got the financial part covered. 

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