In 2030, the ratio of potential caregivers for every person over 80 years old is expected to drop to four from its 2010 number of seven, and by 2050 there will only be three family members available to provide care to relatives 80 years and older. Those figures come from an AARP study called “The Aging of the Baby Boom and the Growing Care Gap.”
As a result, Hopkins suggests that financial advisors use a 1035 exchange to trade in a whole life insurance policy for a hybrid product, such as a fixed-indexed annuity, that includes a long-term-care rider especially for adult children in their 40s and early 50s.
“They don’t have to stop caregiving for their aging loved one,” Hopkins told Financial Advisor. “You just need to advise your clients to care for themselves at the same time.”
Advisor Rianka Dorsainvil, 28, advises clients to set aside earnings for the specific purpose of assisting aging loved ones. Ideally, money to fund a family emergency, such as long-term care, is withdrawn from 30% of an adult child’s take-home pay.
“I recommend that my clients create a family fund with their discretionary cash flow, but only after they have paid money into their retirement accounts, investments and savings accounts that fund their own goals,” said Dorsainvil, founder of the advisory firm Your Greatest Contribution in Maryland.
The Genworth study further found that younger caregivers who help provide financial assistance for the care of their loved ones estimate that they pay, on average, about $10,000 in out-of-pocket expenses annually. That’s up from an average of $7,285 in 2010.
Financial expenses can include everything from household sundries, personal items and transportation services to payment to home nursing staff and long-term-care facilities.
“Even though they had guaranteed income sources, we are seeing the beginning of a new trend where an early wave of baby boomers who don’t have long-term-care planning or insurance in place start to reach those years where they need significant long-term care,” Hopkins said.