“Financial Anemia”

It was the saddest day of my life. December 24, 1989.

I was living and working in Southern California. My mom called from Louisiana. My grandfather—the man who raised me—had passed away.

I remember the funeral. Crying on the shoulder of my best friend’s dad, wishing for one last fishing trip to Lake Rosemound, my grandfather’s favorite destination in the entire world—a small pair of lakes near the Mississippi border where he and his brothers owned a lake house that was decidedly more shack than house.

Last time I saw my Pawpaw he was in a VA nursing home. Still keen of mind, but unable to care for himself. And my grandmother was in no condition at her age to provide proper care either.

All I recall about that nursing home was the smell in the hallways. I’ll leave it at that.

But my grandmother had barely enough money to cover her costs in life, and the VA was the best option she had.

Which is really where today’s dispatch is going…

A story popped up on my news feed—the headline stating, “Many Americans facing financial ruin as costs soar for elder care.”

I know that from firsthand experience with my grandparents all those years ago.

I can only imagine that now, nearly a quarter century later, the financial pain is even more unbearable.

I’ve never forgotten the smell of that nursing home. It has always weighed on me. Same with the knowledge that the primary reason my grandfather had to move into that facility was because my grandparents had no possible way to pay for at-home care, or to set him up in a higher-caliber, private facility.

I never wanted to be in a situation where my grandfather’s final home would be my final home in my dotage one day.

So, back in my 40s, some time around 2004 or 2005, I walked into a New York Life insurance office in South Louisiana and told the agent I wanted to buy a long-term care policy. These are contracts designed to pay the costs of eldercare when a loved one can no longer provide that care on their own because of physical or financial limitations.

The agent was surprised. I still recall her comment.

“We don’t usually get someone so young buying long-term care.”

I knew that going in. At the time, I’d been a financial writer for The Wall Street Journal for more than a decade. Personal finance was my primary beat. I’d talked to more insurance agents, eldercare advocates, and annuity companies than I could ever recall. And I know from those conversations that the single-most debilitating “disease” in old age is financial anemia: being low on funds…

And I knew as well that eldercare costs were shooting the moon. There was no way I was ever going to be able to save enough money for retirement that would cover my living expenses, but also serve as an adequate pot of cash to pay for in-home care, assisted-living, or whatever I might happen to need one day without bankrupting me and causing enormous financial angst for my family.

A long-term care policy seemed the perfect answer. And buying that policy in my 40s, long before most buyers make such a purchase, seemed a savvy financial move. It meant my premiums would be exceptionally low for the value I’d one day receive.

I pay about $1,600 per year for a policy that right now offers me about $260 per day in benefits. Better yet, I added an inflation rider to my policy that offers 5% compounded growth every year. Yes—compounded. Most people can’t believe that. But that’s what I locked in for myself.

It means that if I were to draw on the policy in, say, 30 years from now, my daily benefits would be more than $1,120. Daily. Not monthly.

Now, I don’t know what eldercare costs will be in 30 years, but I’m betting $33,700 per month (the inflation-adjusted equivalent of more than $7,800 per month today) will go a long way toward providing for whatever I need.

And I’m betting that it will definitely cover my eldercare costs here in Europe, where I aim to retire because my nest egg will provide me a far richer life than I’d be able to afford in the US. (My policy will cover my costs in Europe, including the ability for my wife to draw upon it to pay for in-home care costs if she has to care for me).

That’s my double-barreled plan to ensure a quality retirement late in life: A nest egg that will go farther in Europe than it would in America, and a long-term care policy that will ensure me and my wife have the money we need to provide for my care if ever I reach a stage where I can no longer care for my self.

Plus, it means I will never be a financial burden to my children—possibly the greatest financial gift I can give them.

To me, the message in today’s dispatch is twofold:

1. Don’t rule out living abroad in retirement to save on your costs and to live a richer life.

Even if you live overseas for the first part of your retirement, it will help you save money to afford eldercare back in the US if you want to return home when/if that phase arrives.

2. Buy long-term care coverage if you’re under 55 or so, assuming you can afford it.

Eldercare in America is one of the priciest expenses you will have in life. Even if you have a policy to help defray some of those costs, it will reduce your worries and the impact your needs will have on your family.

I know… not the happiest dispatch to end the week. But given the costs of medical care in America, building your plan for tomorrow starts with sober thoughts of what tomorrow might look like.