Who receives Medicaid? Popular show could be on the chopping block
Seventy-two million people in the United States are enrolled in Medicaid, the federal and state health insurance program for people with disabilities or low incomes.
Billy Joel famously sang, “Only the good die young,” but recent research shows that it’s actually the poor who die young.
According to a study by the National Council on Aging (NCOA) and the LeadingAge LTSS Center at the University of Massachusetts Boston, seniors who earn less than $20,000 a year die an average of nine years earlier than those who earn more than $120,000. The elderly middle-income earner, who earns about $60,000, died three years ago.
Experts say this is an ominous sign of the largest surge of Americans turning 65 in history, at a time when income inequality is widening and more seniors are falling into poverty. But with proper planning, financial advisors say that doesn’t have to be the case.
“You’re never ‘too young’ to start planning,” says Brian Davis, a San Diego-based financial advisor with Northwestern Mutual. “I have clients in their 20s who are talking about long-term planning.”
On the other hand, “it’s never too late,” he said.
Why are so many elderly people living in poverty?
Older adults are the only age group with an increase in poverty in 2024, according to Census Bureau data. This equates to more than 9.2 million older Americans.
Some experts say seniors have not only had to deal with rising inflation since the pandemic, but also higher care costs.
Long-term services and supports (LTSS) “remain one of the most significant and common economic shocks. More than half of adults aged 65 and older will need these services for less than two years, and 14% will need this care for five years or more,” the report says. “It costs more than $100,000 just to use a private room in a nursing home for one year.”
LTSS consists of personal assistant services, adult day care, home emergency response systems, homemaker services, institutional care, nursing homes, and assisted living.
A study by Genworth and CareScout that measured the cost of long-term care services found that they have little or no coverage under Medicare or traditional health insurance, and prices generally rise faster than inflation.
“We buy homes, send our kids to college, and even plan for retirement, but few Americans plan for the need for long-term care in the future,” said A. Lynn White, CEO of CareScout Insurance.
How can you avoid poverty as you get older?
- No matter your age, talk to an advisor to create a customized plan.
“We’ll meet as soon as possible to ensure you have enough money for your retirement,” said Jessica Nino, a financial advisor at Edward Jones. “If you’re approaching 50, you’ll want to make the most of all the tools at your fingertips.”
She suggests contributing to a 401(k) for a company match, a Roth IRA for later tax-free withdrawals, and/or a 3x tax-advantaged Health Savings Account (HSA).
HSA contributions are made pre-tax, growth is tax deferred, and distributions are tax-free when used for qualified expenses. “It’s like a Roth IRA, but there are no upfront taxes,” she said.
- Build emergency savings. Davis said the report found that 80% of U.S. households aged 60 and older are unable to withstand economic shocks such as divorce or poor health, making saving in cash and cash-like securities important. Experts say don’t let one setback derail the rest of your life.
- Long-term service and support planning (LTSS). People should consider traditional long-term care insurance or a hybrid plan that allows them to put money into LTSS if needed or leave it to their heirs as a tax-free death benefit, the advisers said.
Note: If you buy a hybrid plan too early, you may end up paying a high premium, but if you buy it too late, it could be too expensive, Nino said. Ideally, buyers will be healthy and between the ages of 40 and 55, she says.
- Hold a family meeting. And in many cases, adult children have become part of the sandwich generation, caught between supporting their own children and their parents at the same time. To prevent or facilitate that, parents and adult children should have an honest conversation about what kind of care mom and dad need and what resources are available, Nino says.
For example, decisions about the family home can be made in advance, she says. They can decide whether to sell the house and pay the capital gains while the parents are alive, sell the house and pay no capital gains when the parents die, rent out the house and use the money to pay for mom and dad’s living expenses, or let the children pay their own way and keep the house together as a family.
Medora Lee is USA TODAY’s money, markets and personal finance reporter. Please contact us at mjlee@usatoday.com. Subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
