There are many factors to consider when planning for retirement and calculating financial security, but one factor rarely gets the attention it deserves: caregiving.
The panel provides answers to the important topics necessary to plan for your golden years, such as caregiving, along with social security, and preparing younger generations for retirement. They also share their insights on how we as Americans need to reimagine our financial future and the steps needed to be better prepared for what lies ahead.
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1 in 4 caregivers has less than a thousand dollars in savings and investments. Why are we so unprepared for this?
If the parent has a disabling condition, like Parkinson's or Alzheimer's, that could be 2 and 1/2 times. Now, if you're on the coast and there are multiple parents, it's real money. And so when we think about caregiving expenses for ourselves in retirement planning, we think about our long-term care when we become 85. But what I'm saying is we are the family bank. We should be thinking about caregiving now for our parents.
RACHELLE AKUFFO: Teresa, you wanted to weigh in here because some of these things when we talk about the 24 hours, that's time out of your work. Not a lot of employers are going to be flexible enough to let people take this sort of time off. How can employers better support some of their workers?
TERESA GHILARDUCCI: Yeah, I'm going to focus on sort of the adult worker. And let's think about, actually, she's in her 50s. And she has the support of her husband, but she's the daughter or the daughter-in-law. If she's non-white and makes, you know-- she's not rich-- you know, makes like below the 90%, she has a 36% chance of giving money and time to her parents or her parents in law-- 36%.
And she's going to pretend to her employer that that's not an obligation. She's going to pretend to her children that's not an obligation. And she's going to steal time and money away from everybody. But the main person she steals time and money away from is herself.
RACHELLE AKUFFO: People are suffering in silence. And they're not sharing this with their employers. So then, Surya, what should employers be doing? What does the next step look like?
SURYA KOLLURI: Yeah, our research persistently shows that employers really care about the financial well-being of their employees. There's an unfortunate peculiar conundrum with caregiving. If I do a survey saying, are you a caregiver? You're going to get back an answer that says no, because people don't identify themselves as caregiver. Whereas, if we ask the survey in terms of did you take mom or dad to the hospital, activities of caregiving, you're going to get a number that's 25% to 30% of the workforce.
So the first step is identifying how many caregivers there are in the workforce and shedding light on the situation, so that we can start to provide caregiving benefits for employees.
RACHELLE AKUFFO: And Bob, I mean, we've talked about people living longer, which obviously means more potential for long-term care. How can we, as caregivers then, be better prepared to support aging parents?
BOB POWELL: So I think the first order of business is to have a family meeting with your children and your parents and sit down and discuss what plans they have in case of an emergency. Far too often, these caregiving incidents are related to a crisis that hasn't been planned for. So having an honest family meeting about do you have all the health and legal documents in place and how will this be paid for?
TERESA GHILARDUCCI: I hate to argue with you, Bob. But I worry about those family conversations because of the power dynamic. A lot of elders are going to be very nervous about talking about money thinking that their children actually have their own interests. I don't think-- I wouldn't do that without mediation.
BOB POWELL: So I would do it with a mediator. And I wouldn't do it in the absence of a mediator.
SURYA KOLLURI: I think there's a full spectrum of responses here. I think, in many situations, it might need a mediator. But I'll give you a personal example. And one example doesn't make the theory, but I'll share the anecdote. My dad, my brother, and I were at a Thanksgiving dinner. And he brought it up himself, saying I may need care, what should I do? And we did what Bob suggests we should do. We got him a caregiving consultation.
So a trained nurse visited his house, checked his kitchen, checked his bedroom, checked his bathroom, looked at his medication, spent an hour with him, and gave him a plan that said, if you want this level of care, here are the options, if [? you want this ?] level of care, these are the options, by price in his zip code.
RACHELLE AKUFFO: So Bob, I know you have a take on long-term insurance.
BOB POWELL: Right, so it's the one product that, perhaps, could help many people who will be in need of caregiving. But it's an insurance policy that isn't bought for lots of different reasons. People think that it's expensive. People also think that if they don't use it that they wasted their money. And so somehow, some way, we need to have that discussion and see if there are ways to at least talk about when and if it's of use and value.
TERESA GHILARDUCCI: Let's have it now.
BOB POWELL: OK.
TERESA GHILARDUCCI: There's no way that there will be a product on the private market that people are able to buy. No insurer wants to take on that risk. It's a social risk. And when you have social risk, you put it into a social insurance program. We should all pay premiums. It's about half a percent of our payroll. We could also tax capital and profits to pay for this. But that's a whole other issue.
If it's all on workers and we all pay our own insurance, the only efficient way to have long-term care insurance if it's social insurance and they were all in it.
BOB POWELL: It's worth noting that Medicaid has become the insurer of last resort for long-term care. And the problem with that is--
TERESA GHILARDUCCI: The U shape. Yeah, it's U-shaped.
BOB POWELL: And part of the issue for me anyway, which is interesting, on "Retirement Daily," our most popular story is about how I can shield my assets so that I can qualify for Medicaid in order to go into a nursing home.
TERESA GHILARDUCCI: If you're poor, you have long-term care. If you're rich, you have no problem. It's that middle class--
RACHELLE AKUFFO: [INAUDIBLE] middle.
TERESA GHILARDUCCI: where they are leaning on families.
RACHELLE AKUFFO: So then separating out healthcare from caregiving, Theresa, why is that important when it comes to funding and how people are supported?
TERESA GHILARDUCCI: Oh, that is such a great question. In some countries, they view long-term care as a service. It's just part of the service that the government funds. In other countries, like ours, we call it healthcare. It's care that often has to do with health, but it's not healthcare. And it should be part of the fabric of what we provide collectively. And we really have to acknowledge how much it helps our economy and how unequally distributed the burden of care is on non-white and lower-paid people.
BOB POWELL: I think about health care Medicare, right, Medigap, all those things, everyone needs that and we know what the costs are associated with that. We don't know whether I will need long-term care or not given the odds. And so we separate it in part because of that, right? We know our known costs and then we know about the unknown risk of needing long-term care.
TERESA GHILARDUCCI: But that's insurance. That's when insurance-- we don't know about our liver, if either of us need a liver. That's where social insurance comes in. We can't do it all ourselves.
RACHELLE AKUFFO: So then how do you plan for that? That sort of the unknown unknowns.
SURYA KOLLURI: So you know, we talk about financial literacy, right? So we decided to ask a different question, and we called it longevity literacy. So you get to age 65. How long do you expect to live? And you can use actuarial tables to measure the answer. And only 30% got it right, right? 30%, about a third said, even if you gave me choices, I'm not going to even try.
And what we found was people with higher levels of longevity literacy have this orientation towards the future, have this orientation, inherently, orientation towards calculating how much they need and their satisfaction in their retirement is higher as well.
TERESA GHILARDUCCI: It's much higher, yeah.
SURYA KOLLURI: So part of my kind of hypothesis of an answer to the question is let's raise people's understanding of longevity.
TERESA GHILARDUCCI: Well, you know what happens, and we're really worried about this as economists, is that you have a lot of accidental bequests. You have people skipping lunch. They may even have nutritional issues, because they're shoving dollar bills in a shoe box, because they don't know how long they're going to live.
BOB POWELL: So Theresa, to that I always say, if you could tell me your date of death, I would build you the perfect retirement plant.
TERESA GHILARDUCCI: Exactly.
BOB POWELL: But given that it's so unknown, I don't know if I'm going to outlive my assets or have more than I or have [INAUDIBLE].
TERESA GHILARDUCCI: And then my answer is insurance.
SURYA KOLLURI: Yeah, exactly. So I wonder if the two of you two agree with this. So we talked about social security.
TERESA GHILARDUCCI: Yes.
SURYA KOLLURI: So think of that as one layer.
TERESA GHILARDUCCI: OK.
SURYA KOLLURI: Maybe you could add another layer on top of that says, hey, let me pay myself a retirement paycheck that's somehow stable through any kind of instrument, which might mitigate the reluctant spender conundrum that you're pointing to.
TERESA GHILARDUCCI: You don't have that underconsumption problem when people have annuities.
SURYA KOLLURI: Exactly.
BOB POWELL: Right. So you should be having guaranteed sources of income to match your essential expenses.
