Long Term Care: No Money, How To Care?

There was a saddening article on The Sunday Times, March 8 2009. The article was about the scarcity of beds in local nursing homes. The reason is that people are flocking to subsidized homes, that it is estimated that one has to wait for 4 months to get a bed there. Ironically, there are some other available beds in other homes, but most families cannot afford them as they aren’t subsidized.

Alternatives that some families take are to check their ageing parents into nursing homes in Malaysia. While it is cheaper, the price really isn’t that encouraging too.

While it has always been the maxim to provide for our elderly parents, sometimes it’s clear to me that the cost of living makes it somewhat near impossible.

Let’s study three possible scenarios arising from the result of an ageing parent becoming disabled. The following are the simplified calculated costs (all costs of nursing homes are derived from the article mentioned):

Scenario 1 – Disabled parent checks into local nursing home
Nursing Home Cost: $1,000 to $4,000 monthly

Scenario 2 – Disabled parent checks into Malaysian nursing home
Nursing Home Cost: $450 to $1,000 monthly

Scenario 3 – One adult child stops work to look after disabled parent
Income loss of adult child: $1,200 to $3,000 monthlyCost required for adult child’s lifestyle is still required

While it is easy to conclude that Scenario 2’s cost is the lowest, not all families can accept putting their disabled and ageing parent in another country. Scenario 3 is the most ideal in the aspect of family ties, but this will literally mean a loss of income due to an adult child stopping work to look after the parent. We also must not forget that this adult child too has lifestyle costs like his/her food, bills, clothing, etc.

Most often, families are likely to choose Scenario 1, and pool resources from family members to pay for the nursing homes cost. And if they have no choice but to choose subsidized nursing homes, they may now have to wait 4 months to get a bed for their parent.

The Ministry of Health’s Eldershield plan created for CPF members is a useful idea. However, it falls short in relevance to the spectrum of the problem. By default, Eldershield insured members are entitled $400 monthly for 6 years in the event of severe disability under their terms and conditions*. This would be a far cry from the nursing home costs in Singapore. Paying out for 6 years only, also isn’t comforting enough. Another whammy is that such coverage ends when the insured reaches age 65.

However, private supplementary plans have been created to make the Eldershield coverage relevant. Using the CPF Medisave as insurance premiums, such plans can increase the monthly payout up to $2,000. The payout period can also be extended to 12 years to a lifetime.

In conclusion, the most cost effective arrangement to cater to this long term care problem is the Eldershield plus is supplementary plan. Caregivers can also pool Medisave resources to supplement the premiums, instead of needing to pool to supplement the nursing home bills. Either ways, the disabled and ageing parent remains closer to home, and yet having his/her medical needs taken care of.

* To qualify for payout for Eldershield, the insured must not be able to perform at least 3 of the following Activities of Daily Living: Washing, Dressing, Feeding, Toileting, Mobility, Transferring.

Defensive or Offensive?

I thought that financial planning can be explained a little differently.

Consider the work that I do. I help clients review their finances, adjust spending, set up insurance programs, build investment portfolios, bring dividends, bring interest rates, monitor performances, etc. These help preserve and grow money that my clients have.

I explained the above to a couple of my important clients, and asked them what they thought. Generally, they felt it was good to have such work in place. I later told them, that I coined such work as defensive financial planning.

So when there is a defensive, there has to be an opposite called offensive. Now what's offensive then?

What if I told you that an aggressive investment portfolio is not considered offensive? What if I told you that cutting down expenses by 50% is not considered offensive? What then is offensive?

I explained further that offensive means that you work on building your income, not your investment portfolios.

Here's why I said that.

All these years I discovered that clients want and have an ideal lifestyle ahead of them. However, they usually dismiss these ideals because it's just "not realistic" due to the expenses that they already have in their lives. They say these commitments cannot be reduced, despite how they try.

Fine. I mean, why reduce it? Why not earn more?

With recessions like what we are facing, opportunities abound everywhere. The majority of the herd will be hiding, not daring to make potentially rewarding moves in their career, or strike out on business opportunities in the weekends. If you observed the streets on Valentine's Day yesterday, you would have guessed that those nice looking gentlemen selling bouquets of flowers made very handsome profits (why didn't I do that myself???!!!).

Offensive financial planning is critical, because how you save, how you spend, how you build your insurance, how you build your investments, all depend on how much you earn!

You can increase your income by weekend business opportunities, trade some commodities, provide a service to a niche market in your evenings, work hard and smart in your existing career with a definite direction and plan of growth, whatever it may be.

You don't have to desperately put on whatever armour you can find now and go to war. Begin by first visiting the library and get your hands on good books. If you'd like personal recommendations, you may drop me an email, and I'll gladly give you my choice titles. Whatever you do, your new journey of success only begins on the day you take your first step. Else, you'll probably find yourself in the same place when it's 5 years later from now.

All the best.