Financial Planning for “Orphan Retirees”
In the United States, over 16 million individuals aged 65 and older live alone. This growing trend of aging without spouses or close family members raises significant concerns, particularly regarding long-term care. For many, the absence of family heirs complicates estate planning, but the more pressing issue is how to manage potential incapacitation or debilitating illnesses like Alzheimer’s disease.
Factors such as increased life expectancy, rising divorce rates among older adults, and a notable trend towards childlessness suggest that the number of “orphan retirees” will continue to rise. For these individuals, long-term care becomes a critical concern.
Are There Long-Term Care Options for Orphan Retirees?
Unfortunately, options for solo retirees seeking long-term care are limited. Medicare does not cover long-term care, and Medicaid only becomes available once assets are significantly depleted.
Mary Clements Evans, a financial planner and author of Emotionally Invested, Working to Bring You Financial Happiness & Change the Way You Think About Money, emphasizes the financial challenges. “There are no solutions if you don’t have money,” she states. “The solutions if you do have money are pretty good.”
Evans notes that 63% of nursing home residents rely on Medicaid. “Entering a nursing home can cost around $120,000 a year,” she explains. “Many people don’t have that kind of money readily available, leading to subpar care in Medicaid facilities.”
For those who can afford it, 55+ communities offer a viable option. “Every 55+ community I know has a waiting list,” Evans shares. “People are seeking active retirement lifestyles and companionship, especially as they become more distanced from their children. These communities are evolving to focus on health and wellness.”
Think Outside the Box
Eric Bond, President of Octave Wealth Management in Long Beach, California, encourages thinking creatively about long-term care solutions. He suggests considering long-term care insurance, despite its higher costs as one ages.
“For individuals who may have a distant daughter or are estranged from family, a long-term care policy makes tremendous sense,” he advises. Even at age 65, premiums can range from $2,749 to $4,599 annually. It’s crucial to secure coverage early, as costs increase with age.
One alternative is an annuity with a long-term care option. “While I’m generally not a fan of annuities, they can be beneficial in this context,” Evans explains. “With a good policy, you can have life insurance coverage from day one. If you invest $50,000 and pass away shortly after, the life insurance could pay out $100,000. Depending on the policy, you could also receive multiple times that amount for long-term care.”
One of the Lucky Ones
Lorraine Cichowski, a 72-year-old retired executive in Florida, exemplifies a fortunate orphan retiree. Having never married or had children, she established an estate plan during the COVID-19 pandemic. With a large extended family and long-time friends, she has chosen to leave her estate to her schools.
Cichowski has maintained long-term care insurance for 20 years, taking advantage of inflation options to increase her coverage. “I’m one of those lucky people,” she reflects. “I have multiple income sources, including pensions and annuities, but like many, I wish I had saved a bit more.”
Other Tips for Orphan Retirees
- Regularly assess and re-evaluate your financial situation.
- Establish a robust emergency fund.
- Ensure your estate plan is comprehensive; even without dependents, it’s essential to have a will, medical directive, and financial power of attorney.
- Verify if your life insurance covers debts or funeral expenses.
- Build a support network of trusted friends and mentors, and consider professional assistance if needed.
YOUR TURN
Are you an orphan retiree? What plans do you have for your future? Share your insights in the comments!
Stay informed about your finances with Senior Planet from AARP. Join us for live lectures on finance, money management, budgeting tips, articles, and more. Explore our offerings here. Questions? Call our Senior Planet Tech Hotline: 888-713-3495.
Rodney A. Brooks is an award-winning journalist and author. Formerly the Deputy Managing Editor/Money at USA TODAY, his retirement columns appear in U.S. News & World Report and Senior Planet.com. He has also contributed to National Geographic, The Washington Post, and USA TODAY, and has testified before the U.S. Senate Special Committee on Aging. His book, “The Rise & Fall of the Freedman’s Bank, And Its Lasting Socio-economic Impact on Black America,” was released in 2024. He is also the author of “Fixing the Racial Wealth Gap.” Visit his website at www.rodneyabrooks.com.
Your use of any financial advice is at your sole discretion and risk. Seniorplanet.org and Older Adults Technology Services from AARP make no claim or promise of any result or success.
In the United States, over 16 million individuals aged 65 and older live alone. This growing trend of aging without spouses or close family members raises significant concerns, particularly regarding long-term care. For many, the absence of family heirs complicates estate planning, but the more pressing issue is how to manage potential incapacitation or debilitating illnesses like Alzheimer’s disease.
Factors such as increased life expectancy, rising divorce rates among older adults, and a notable trend towards childlessness suggest that the number of “orphan retirees” will continue to rise. For these individuals, long-term care becomes a critical concern.
Are There Long-Term Care Options for Orphan Retirees?
Unfortunately, options for solo retirees seeking long-term care are limited. Medicare does not cover long-term care, and Medicaid only becomes available once assets are significantly depleted.
Mary Clements Evans, a financial planner and author of Emotionally Invested, Working to Bring You Financial Happiness & Change the Way You Think About Money, emphasizes the financial challenges. “There are no solutions if you don’t have money,” she states. “The solutions if you do have money are pretty good.”
Evans notes that 63% of nursing home residents rely on Medicaid. “Entering a nursing home can cost around $120,000 a year,” she explains. “Many people don’t have that kind of money readily available, leading to subpar care in Medicaid facilities.”
For those who can afford it, 55+ communities offer a viable option. “Every 55+ community I know has a waiting list,” Evans shares. “People are seeking active retirement lifestyles and companionship, especially as they become more distanced from their children. These communities are evolving to focus on health and wellness.”
Think Outside the Box
Eric Bond, President of Octave Wealth Management in Long Beach, California, encourages thinking creatively about long-term care solutions. He suggests considering long-term care insurance, despite its higher costs as one ages.
“For individuals who may have a distant daughter or are estranged from family, a long-term care policy makes tremendous sense,” he advises. Even at age 65, premiums can range from $2,749 to $4,599 annually. It’s crucial to secure coverage early, as costs increase with age.
One alternative is an annuity with a long-term care option. “While I’m generally not a fan of annuities, they can be beneficial in this context,” Evans explains. “With a good policy, you can have life insurance coverage from day one. If you invest $50,000 and pass away shortly after, the life insurance could pay out $100,000. Depending on the policy, you could also receive multiple times that amount for long-term care.”
One of the Lucky Ones
Lorraine Cichowski, a 72-year-old retired executive in Florida, exemplifies a fortunate orphan retiree. Having never married or had children, she established an estate plan during the COVID-19 pandemic. With a large extended family and long-time friends, she has chosen to leave her estate to her schools.
Cichowski has maintained long-term care insurance for 20 years, taking advantage of inflation options to increase her coverage. “I’m one of those lucky people,” she reflects. “I have multiple income sources, including pensions and annuities, but like many, I wish I had saved a bit more.”
Other Tips for Orphan Retirees
- Regularly assess and re-evaluate your financial situation.
- Establish a robust emergency fund.
- Ensure your estate plan is comprehensive; even without dependents, it’s essential to have a will, medical directive, and financial power of attorney.
- Verify if your life insurance covers debts or funeral expenses.
- Build a support network of trusted friends and mentors, and consider professional assistance if needed.
YOUR TURN
Are you an orphan retiree? What plans do you have for your future? Share your insights in the comments!
Stay informed about your finances with Senior Planet from AARP. Join us for live lectures on finance, money management, budgeting tips, articles, and more. Explore our offerings here. Questions? Call our Senior Planet Tech Hotline: 888-713-3495.
Rodney A. Brooks is an award-winning journalist and author. Formerly the Deputy Managing Editor/Money at USA TODAY, his retirement columns appear in U.S. News & World Report and Senior Planet.com. He has also contributed to National Geographic, The Washington Post, and USA TODAY, and has testified before the U.S. Senate Special Committee on Aging. His book, “The Rise & Fall of the Freedman’s Bank, And Its Lasting Socio-economic Impact on Black America,” was released in 2024. He is also the author of “Fixing the Racial Wealth Gap.” Visit his website at www.rodneyabrooks.com.
Your use of any financial advice is at your sole discretion and risk. Seniorplanet.org and Older Adults Technology Services from AARP make no claim or promise of any result or success.
