Financial Surprises Retirees (and Those About to Retire) Want to Avoid
If you’re looking for a safe nursing home for your loved one, the federal government’s new comparison tool is helpful starting point, but long-term care experts advise digging a bit deeper.
The Centers for Medicare and Medicaid (CMS) in October introduced an eye-catching alert icon on their online Nursing Home Compare tool to signal that a particular facility had recently been cited for abuse or neglect. Before the icon’s debut, consumers could learn about a nursing home’s history of abuse by looking through its health-inspection reports, which are also available on Nursing Home Compare.
The icon, a white hand within a red
circle, appears for facilities cited in
the past year for abuse that led to
harm of a resident and/or those cited
in each of the past two years for abuse
that could potentially have led to a
resident’s harm. CMS said that the
symbol, updated monthly, is meant to
supplement its five-star rating system
and help consumers “develop a more
complete understanding of a facility’s quality.”
The Wall Street Journal reported last month that 760 of the database’s 15,262 Medicaid- and Medicare-certified facilities — nearly 5% — had been marked as such.
“Our new abuse icon helps patients make the best choices for their care, incentivizing nursing homes to compete on quality,” CMS administrator Seema Verma said in a statement emailed to MarketWatch. “While fewer than 5 percent of the more than 15,000 nursing homes participating in Medicare and Medicaid will be subject to the icon, CMS nevertheless urges all providers to focus on preventing abuse.”
Robyn Grant, the director of public policy and advocacy at the National Consumer Voice for Quality Long-Term Care, said she thought the new icon would serve to grab public attention. It also serves as an important incentive for nursing homes to examine their policies and procedures and work to prevent, respond to, and report abuse and neglect, she told MarketWatch.
“Abuse is just a persistent and pervasive problem in nursing homes,” Grant said. “I just think we do need something that’s startling enough to get people’s attention.”
But the warning drew complaints from the American Health Care Association (AHCA) and LeadingAge, two nursing-home industry associations. The groups argued that the icon gave the wrong impression — the visual urges consumers to avoid a facility altogether rather than investigate it further, they said — and didn’t account for facilities having taken corrective action after a citation.
“We feel that that icon is not helping a consumer, and that there’s much more information about an organization either being compliant or noncompliant,” Janine Finck-Boyle, LeadingAge’s vice president of regulatory affairs, told MarketWatch. She questioned whether consumers would actually look any deeper to learn about a facility after seeing the bright-red icon.
Mark Parkinson, AHCA president and chief executive, suggested in a statement that the icon had the potential to create “unnecessary worry” and “decrease access to care.”
Icon controversy notwithstanding, abuse in nursing homes frequently goes unreported. The Health and Human Services Department’s Office of Inspector General this year estimated that one in five high-risk hospital emergency-room claims for Medicare beneficiaries living in nursing homes in 2016 “were the result of potential abuse or neglect.”
“We determined that [nursing homes] failed to report many of these incidents to the Survey Agencies in accordance with applicable Federal requirements,” the OIG review added.
If you’re looking for a nursing home for a parent, grandparent or other loved one, you might be preoccupied with any number of safety concerns: abuse and neglect, falls, infection or even unnecessary use of antipsychotic medication. But experts say there are steps you can take to help minimize risk. Here’s what you can do:
Check Nursing Home Compare, but seek additional context. The government site lists the 15,000-plus nursing homes nationwide that participate in Medicare and Medicaid. Some 97.5% of nursing homes in the U.S. were Medicare-certified in 2016, while 95.2% were Medicaid-certified, according to a February report from the National Center for Health Statistics.
While the database can help narrow down possibilities, there are lots of other factors to take into consideration, Grant said. For starters, read the facility’s actual survey report and then ask the facility what it has done to correct any problems and ensure they don’t happen again, she said.
Lisa Laney, an Asheville-based aging life care professional and board member for the nonprofit Aging Life Care Association (ALCA), agreed that Nursing Home Compare was a “starting point.” “There’s nothing better than firsthand knowledge from someone who’s had a family member in that community recently,” she said. “What that facility was like last year may be totally different from this year.”
Visit the facility — and not just during its optimal moments. “You should always set up a tour with an admissions person, and then you should go back without the admission person, because you want to see what really goes on,” said Debbie Fins, another aging life care professional based in Worcester, Mass., who also sits on ALCA’s board. Late morning on Saturday or Sunday will give you a sense of a facility’s “weakest point” in terms of staffing, Laney said.
Observe how staff and residents interact; whether residents seem engaged in activity or just slumped over with nothing to do; whether residents appear well-groomed; and how long it takes for staff to respond when a resident needs help, Grant said. At mealtime, pay attention to whether residents have a choice in what they eat, how food is served, and whether aides are assisting those who need help eating, Fins said.
Use your nose, Fins added: People have accidents, but is there a strong odor of urine or staleness in the air? Do people smell like they haven’t been cared for?
Research how well a facility is staffed. Ask about staff turnover rate, Laney said. “The biggest complaint we hear, bar none, is that there aren’t enough staff to take care of residents,” Grant said. Nursing Home Compare provides staffing charts for comparison.
Staffing can have a big impact on safety, Grant added: Neglect can stem from an inadequate number of people — often overworked and overwhelmed — available to provide care. Abuse, however unjustified, can occur when staffers are under tremendous pressure due to workload.
Experts recommend 4.1 hours of “direct-care” nursing time per resident a day, a number that includes time spent with nursing assistants, licensed nursing staff and registered nurses, Grant said. The New York-based Long Term Care Community Coalition offers state-by-state data on facilities’ direct-care staffing levels.
Meet with the nursing-home administrator and director of nursing. “They’re the two most important people for establishing the culture of that entire workforce,” Laney said. Take notice if the higher-ups seem unapproachable or cold, she said, as that could provide a window into how they treat staff.
Assess the potential for abuse. Ask about the facility’s policy for male staff members providing intimate care for female residents, Laney said, and how it handles such situations on short-staffed days. Ask what staff members’ anti-abuse training entails, Finck-Boyle added — as well as how exactly abuse allegations are reported and investigated, how family members are notified of an incident, and what preventive measures the facility takes.
Check CMS’s list of special focus facilities (SFFs), or nursing homes with “a history of serious quality issues” that receive extra attention from CMS. The government lists nursing homes that have been recently added, have or haven’t improved, and qualify as SFF candidates, among other categories. “All things being equal, if you have a lot of candidates in an area, I would probably stay away from the special focus facility,” Grant said.
Contact your national, state or local long-term care ombudsman program, a network that advocates for nursing-home residents. Ombudsmen can provide information on their experiences with various facilities, Grant said, and give you a general sense of the types of complaints they’ve received and how responsive a facility has been.
Consider a facility close to family and friends. “Finding a place that’s geographically convenient for people to visit regularly is something to keep in mind,” said Fins. “The more family or friends are visible in a facility in general, the better care people get.” Facility staff will know that “someone’s watching,” she said, and a family member can also pick up on subtle changes like weight loss or behavioral shifts.
If you wind up choosing a facility far away from family, try to enlist help from a care manager (who can act as an advocate for folks caring for aging family members), neighbors or fellow churchgoers, Laney suggested. And consider that pairing your loved one with a roommate could potentially provide “another set of eyes and ears,” particularly if she or he has conditions like memory impairment or trouble communicating.
Seek insight from a nursing home’s family council, a voluntary group composed of residents’ family members who voice concerns and advocate for improvements. Ask during a tour of the facility whether there is an active family council and who its leaders are, Finck-Boyle said.
Don’t be seduced by bells and whistles. “For someone living in those four walls, the only thing that matters is the quality of the staff that’s taking care of them — period,” Laney said. “The beautiful landscaping outside your window doesn’t matter if there’s nobody to help you pee in a timely fashion, and with dignity and compassion.”
If your loved one has dementia or Alzheimer’s disease, ask whether staff are trained in the basics of Alzheimer’s and dementia care, and provide care based on a person’s individual needs, said Doug Pace, the director of mission partnerships for the Alzheimer’s Association. “It is about balancing safety and autonomy for those folks,” he said.
Ask about the facility’s policy on using antipsychotic medications and its non-pharmacological approaches to care, Pace added. Patient advocates today warn about the dangers of misusing antipsychotic medications to treat dementia patients’ behavioral symptoms.
To the extent possible, start your research in advance. “If you have a loved one who is declining, and you are concerned that in the future they’re going to need nursing-home care, now’s the time to be looking — not when they’re in the hospital and you have to make a decision in 24 hours,” Fins said.
MarketWatch
2020 may be a good year for homebuyers
Whether you’re buying a house for the first time or the fifth, deciding how much money to put down isn't easy. While 20% is a good rule of thumb, there's no one-size-fits-all figure.
How much to put down on a house depends on the monthly payment you can afford, the cash you have in reserve and your plans for the home. If you expect to buy soon, here is what you need to know.
How much down payment for a house
is best?
There's no right amount to put down
on a home, but there are some
guidelines to consider.
"A 20% down payment is still highly
recommended because mortgage
insurance is not required with 20%
down," says Randall Yates, founder and CEO of The Lenders Network, an online mortgage marketplace. "The best interest rates are also given to borrowers with higher
down payments."
But many buyers put down much less. The median home down payment is 12% for all homebuyers and 6% for first-time homebuyers, according to the 2019 Profile of Home Buyers and Sellers from the National Association of Realtors.
That said, many mortgage lenders offer conventional loans with a down payment as low
as 3%.
What's more, some first-time homebuyer and government-backed mortgage programs allow you to qualify with no down payment.
As a result, the buyer is left to decide how much down payment is right. Your financial situation and goals for your home can guide you rather than rules of thumb or
lender minimums.
There are several factors to think about to choose the right down payment amount.
These include:
The monthly mortgage payment you can afford. The more money you put down, the lower the loan amount – and your monthly payments – will be. Because mortgage loans are typically so large, you will likely need to put down a lot to make a big difference.
If you have flexibility with how much you can put down, run some numbers to see the difference in your monthly payment and what's best for your budget.
Take this example looking at 3%, 5% and 10% down payments. If you put 3% down on a $250,000 home with a 30-year term and 4.5% fixed interest rate, your monthly payment for principal and interest would be $1,229.
With a 5% down payment, your monthly payment would drop by only $26. But if you increase it to 10%, you would pay $89 less per month than you would with 3% down, which can make a bigger difference over time.
Private mortgage insurance. It's not just the principal and interest that affect you, though. If you have a conventional loan, you could also be on the hook for private mortgage insurance, or PMI, unless you put down at least 20%.
PMI is designed to protect the lender if you can no longer make your monthly payments. If your loan-to-value ratio – the loan amount divided by the value of the property – is too high, the lender could lose money in foreclosure, even after selling the home.
PMI can cost between 0.55% and 2.25% of the original loan amount each year, according to the Urban Institute 2017 Mortgage Insurance Data at a Glance report. Once your loan-to-value ratio, or LTV, reaches 80%, the risk is low enough that PMI is no longer required.
If you can't afford a 20% down payment, PMI may be a given. And on some government-backed loans, mortgage insurance is required regardless of how much you put down. But if you can reasonably afford to avoid PMI, you may want to make a larger down payment.
Of course, you can get rid of PMI after you close on the loan if you get to the point where your LTV is 80% or lower.
"The bank will send an appraiser out, and if they evaluate the home and you have at least 20% equity," says Joelle Spear, a certified financial planner with Canby Financial Advisors in Massachusetts, "then they will simply remove (the PMI) from your account."
But the lower your down payment, the longer it will take to get to this point.
Interest rate. The more money you can put down, the less risk you pose to the lender. As a result, lenders may be willing to offer you a lower interest rate.
On the flip side, loans with low or no down payments are more accessible, but they can be more expensive overall.
"When a lender is financing 100% of the purchase price, they're obviously taking on greater risk," Yates says. "To offset that increased risk, lenders charge higher fees and interest rates."
Closing costs. As you're deciding how much money to put down on your next home, consider your closing costs. These costs typically amount to 2% to 5% of the house's price, and you can choose to either pay them upfront in cash or roll them into the loan.
If you're paying the closing costs upfront, that's money you won't be able to use for the down payment. But if you finance the costs, you will increase your monthly payment and total interest charges.
Talk with your lender to determine what your closing costs will be, and compare paying them over time with paying them upfront.
If you only have enough cash to meet the lender's minimum down payment, you may have no choice but to finance your closing costs. If you have the cash to cover the down payment and closing costs, keep in mind that your down payment may be less than you thought.
Emergency savings. The more money you can put down, the less you'll pay each month. But if you drain your savings account, you could set yourself up for trouble.
"Homeownership can be expensive, and often unexpected expenses can arise,"
Yates says.
If a major appliance breaks or you run into other emergency expenses, a zero balance in your savings account could mean using high-interest credit cards to bridge the gap.
And if your budget is already tight, those card payments could make keeping up with your mortgage and other monthly obligations challenging.
Saving between 1% and 4% of the value of your home every year for home-related expenses is a good goal. But when you first buy the home, you may want a larger buffer.
There's no right answer to the question of how much money you should have in savings. But consider keeping enough to give you the peace of mind to confidently move forward with buying the home.
Plans with the home. A loan program with low or no down payments can be appealing, but it could create an equity problem, depending on your plans and the housing market. If your home's value decreases, you could end up with negative equity, which means you owe more than your home is worth.
If you plan to stay in the home for a long time, the loan amount will decrease and the market value could increase again, fixing the negative equity problem. But sometimes plans change.
"If you end up having to move for a job or some other reason," Spear says, "you might be forced to pay the bank money when you sell the house instead of collecting equity."
You may be stuck in the home if you can't afford to pay the lender the difference between what the home is worth and what you owe.
Although not ideal, if you made a large down payment and have a fairly low LTV, a low home value won't ruin your finances. Home prices typically trend upward over time.
How to decide how much to put down on a house
Several national and local programs can help eligible buyers get into homes. But you typically have to meet program requirements.
Some programs are available only to low-income homebuyers. You may also need to live in the home you buy for a certain amount of time and meet other requirements. Otherwise, you'll need to repay the amount you received.
Whatever you do, avoid buying a home until you have a big enough down payment to afford it without draining your emergency fund.
Look into down payment assistance programs
If you retire before you’re eligible for Medicare and don’t have coverage through a spouse’s employer or other group plan, you’re on your own for health care—and it may not be cheap. Quit working at age 55, for example, when you’re still 10 years away from Medicare eligibility, and your coverage in the individual market may cost hundreds of dollars more than Medicare each month. “Having private insurance is just so expensive,” says Tiffany Beard, a financial planner with Wealth Enhancement Group, in Jacksonville, Fla.
That’s particularly true if you don’t qualify for premium tax credits on the Affordable Care Act insurance exchanges. Early retirees may be able to tweak their retirement drawdown strategy to qualify for those tax credits.
If you had employer health coverage and you’ve stopped working, you may be eligible for Cobra coverage. But be sure you understand you’ll be paying 110% of the entire cost, not just the smaller premium you paid while working. And Cobra is often limited in length; you may only be eligible for a year to 18 months.
Louise Bryant, 59, founder of Financial Spyglass, a fee-only comprehensive planning firm in Rye, N.Y., and her husband both have small businesses and are no longer on their previous corporate health plans. Until recently, they paid $3,400 each month in Cobra premiums, which was much higher than their monthly health care cost under their corporate health coverage. And finding a plan on the Affordable Care Act exchanges hasn’t been easy. Even getting the information you need to coordinate with your doctors can mean numerous phone calls, emails and even office visits. “It’s a lot of work to wade through the options for coverage after Cobra and before Medicare as small business owners,” she says.
How to tackle it: Check with your state to see how long you may be eligible for Cobra. For instance, if your coverage is from an employer based in New York state, you may be eligible for up to three years total of coverage under Cobra rather than the more typical 18 months. Bryant eventually found a plan for 2019 for $1,896, or $948 each, per month to cover herself and her husband. As of December 2019, her husband is covered by Medicare. And she has found one plan for 2020 that her doctors accept as “in network” that will be $1,137 a month. “It can work,” she says.
Alternatively, find a part-time job with health benefits; Beard says one client started working at a Publix grocery store for the benefits. If you have a health savings account, fund it to the maximum now so you can use it in retirement.
Surprise No. 4: I Retired Early, and Health Care is Expensive and Hard to Get
You thought you had estimated your spending needs carefully before retirement, but you’re tapping your nest egg more often than expected. There’s the out-of-pocket costs for the hip replacement you didn’t expect or for the air conditioning unit that finally gave out. Watching your money dwindle away interferes with what are supposed to be your carefree years. Retirees regularly underestimate their costs in retirement, planners say. New Orleans retiree Susan Garcia, for example, says she “didn’t want to work until age 84” and tried to plan carefully for retirement with her husband, who had retired about 15 years before she did.
But they still encounter expenses they can’t always plan for, such as a new roof on the house and other maintenance issues.
How to tackle it: Creating a retirement spending budget and sticking to it are just as important as in your working days or when you were raising a family. Include everything from expected future costs for long-term care to everyday spending. Garcia and her husband, for example, researched local assisted-living facilities with their financial planner, Lauren Lindsay, to see what they could afford, and then included some $4,000 a month for care in the budget. Garcia also now factors in money for emergency maintenance and other needs, which offers some peace of mind, she says.
Surprise No. 5: My Nest Egg is Disappearing Faster Than I Thought it Would
You may feel set for retirement as you start out, but covering health costs in your early years can look much different than paying for care when you are older and ill. Even if you have long-term-care insurance, it will cover only a portion of your care. Many people also wrongly assume Medicare covers long-term care—but it doesn’t, except in very limited circumstances. And waiting until a spouse or parent needs help before figuring out how to pay for it may leave you scrambling for solutions and forced to pay even more for emergency help.
Sherry McKinney, a financial planning professional with Stearns Financial Group, in Greensboro, N.C., dealt personally with the long-term-care-cost dilemma. Her mother had spent down her assets, and McKinney was going to step in and pay the costs of assisted living for her. Her mom fell and ended up in nursing care instead, “but when you are facing the payment of $3,000 to $4,000 a month, it is daunting and concerning,” McKinney says. “I had no idea that my mom would be in this weird zone where she makes too much money to qualify for assistance, but nowhere near enough to pay the cost of assisted living.”
How to tackle it: If you have an extended family and it’s financially possible, you may need to have a family meeting and figure out whether everyone can pitch in for care. McKinney’s family—all four adult children and 10 adult grandchildren—decided to ask all its members to consider helping, even just a small amount on a monthly basis. She also regularly sees her own clients doing the same.
Alternatives can include having the children purchase a life insurance policy with a long-term-care rider for their parents, keeping in mind that this needs to be done before care is needed. The children who pay the premiums on the policy should be designated as beneficiary of the life insurance in the event the parents don’t need long-term care, McKinney says. Also, investigate whether you or a loved one might be eligible for veterans benefits or other assistance. Start your search at BenefitsCheckup.org.
Surprise No. 6: Long-Term Care is More Costly Than I Imagined