In the latest episode of The Long View, Jean Chatzky, an editor, podcast host, and CEO of HerMoney.com, discusses how women can safeguard their financial future. She emphasizes that women’s investment strategies should differ from traditional ones and shares insights on preparing for the later stages of life.
Here are some key excerpts from Chatzky’s discussion with Morningstar’s Christine Benz and Amy Arnott.
Strategies for Women’s Long-Term Care Planning
Amy Arnott: We’d like to delve further into the topic of long-term care. You mentioned it’s a considerable concern for many women. What general advice do you have regarding how individuals should navigate long-term care, especially in terms of securing affordable long-term-care insurance?
Jean Chatzky: There are two critical decisions you need to make. First, will you attempt to purchase long-term-care insurance? This type of insurance is beneficial for a specific group. Individuals with several million dollars—around three million—can often invest and afford their care themselves. However, if you have significantly less than this, particularly under a million, a long-term-care policy might be unattainable. In such cases, prolonged care could deplete your resources, and you may qualify for Medicaid. The middle ground—those with more assets who wish to preserve them for heirs—represents where long-term-care policies become practical.
Recently, there has been a drastic decline in the number of insurers offering traditional long-term-care policies, alongside significant premium increases for existing policyholders—sometimes by 10%, 20%, or even more annually, which complicates this market. A promising trend is the emergence of hybrid policies that combine long-term care insurance with either life insurance or an annuity. This setup alleviates concerns about paying premiums for years without needing to use the policy.
For instance, I purchased a long-term-care life insurance policy that allows me to utilize benefits if necessary, and should I not require them, the benefits will be available as life insurance for my children after I pass. This is where you’d want to concentrate your insurance search. Also, keep in mind that it’s unnecessary to cover all your potential costs. Acquiring a policy that covers a couple of years of in-home care or assisted living is typically sufficient—averaging about three years tends to be a reasonable estimate.
The Financial Burden on Adult Daughters as Caregivers
Christine Benz: Jean, I have a related question regarding long-term care. Adult daughters frequently become caregivers for their aging parents. You highlighted this concern earlier. It’s one of the factors that adversely affects lifetime earnings. What have you found in your discussions with women regarding this issue?
Chatzky: A MetLife study from a few years back estimated the financial impact of caregiving at approximately $340,000 in lost income for caregivers. This is a significant burden. It extends beyond merely lost income; it includes diminished career advancement, fewer Social Security credits, and the challenges of re-entering the workforce after a hiatus. While I was not a long-term caregiver for my parents, I have observed many who faced this dilemma. Often, they wonder if there could have been alternatives. Sometimes, even if the cost of care equates to their earnings, it may still be more prudent to remain employed and seek alternative ways to fund care rather than completely divert their career paths. The ‘sandwich generation’ faces a myriad of simultaneous challenges. We must manage our retirement savings while also financing college for our children and supporting our aging parents. With retirement, we have the flexibility to postpone it. For our children’s education, though we may not prefer to borrow, options are available. However, when it comes to our parents, we often overlook potential choices, which deserves further exploration.
The Broader Benefits of Working Longer
Arnott: You pointed out that women needing to care for their parents should strive to stay in the workforce. This notion extends beyond just long-term care; working longer can offer benefits not only financially but also in terms of social engagement, a sense of purpose, and maintaining an active lifestyle. If individuals can continue working longer and perhaps not contribute as heavily to retirement savings, focusing instead on enjoying life a bit more—traveling and engaging in enjoyable activities—would you endorse this approach?
Chatzky: Absolutely. Our understanding of retirement is evolving—we may need a new term for it altogether. Numerous individuals are choosing to work longer, exploring phased retirements, or taking breaks such as sabbaticals or adult gap years. What’s becoming clear is that life expectancy extends much longer than when retirement was initially conceptualized, providing us with diverse opportunities for our later years—whether to earn an income, start a business, volunteer, or travel. A consistent theme is the critical importance of relationships, which are vital for enhancing our happiness, health, and mental sharpness as we navigate these extended and fulfilling lives.
