Someone was asking me the other day, “Where do you get your investment ideas?”
The truth is that, my outlook tends to be bleak enough that I see The Walking Dead as a fine source of long-term financial planning guidance.
Others see money market funds as the best safe harbor. Or, maybe gold. Or money under mattresses. My safe money tends to go into flashlight batteries.
See also: LTCI Watch: Zombie loans
But, of course, eight of the 10 last apocalypses I’ve expected never happened at all. The two that did happen weren’t much to talk about. And it’s really hard to keep track of flashlights and flashlight batteries.
What if civilization keeps going? What then?
I think Mark Dearsley of Partnership UK, a major provider of impaired risk single-premium immediate annuities (SPIAs) in the United Kingdom, provided a clue recently, when he talked about “point of need” long-term care (LTC) financing options at a session at the Intercompany Long Term Care Insurance (ILTCI) Conference.
The catastrophe under our noses is ordinary people’s failure to plan for LTC expenses or, really, to plan adequately for any other post-retirement expenses.
What will we do in 10 years when the oldest baby boomers start turning 80, and heading toward the “oldest old” category?
Some people who need services will literally end up on the sidewalk. There are already unlucky boomers who are somewhere in the ballpark of needing LTC services living on the sidewalk near the door to the office I work at in New York City. I think they often collect enough cash from panhandling to get a room for the night, but there are no guarantees.
Some people who need care will end up in terrible family care situations or in warehouse-like nursing homes straight out of a Dickens novel.
Chances are that most people who need care will end up in an informal care or formal care situation that is fine. Maybe it will not be the kind of sensitive, flexible, person-centered care that federal law now emphatically promises us, but it will be enough to keep people breathing, and fed, after a fashion.
How do we get from the point we’re at now, to the point in 2026, or 2031, or 2036 in which a high percentage of people who need LTC services are getting some kind of services?
One answer is that maybe people like you have helped about 15 percent of Americans get enough LTCI or other LTC financing arrangements to protect themselves pretty well against LTC expenses.
Maybe you still have a decent shot at helping another 15 percent get LTCI, short-term care insurance (STCI), or other products that can minimize the risk that those consumers will have major unmet LTC needs.
Scientists seem to be making great strides in understanding and fighting Alzheimer’s disease and other forms of dementia. Maybe that will prevent and postpone enough disability to reduce the near-term pressure on LTC providers. Maybe advances in medical research will have the financial equivalent of providing solid LTCI coverage for 10 percent of the boomers.
If those guesstimates are correct, that may mean that about 60 percent of Americans will need LTC services and have no obvious means to pay for it.
Partnership UK seems to think insurers could use products like its impaired risk SPIAs to convert home equity into significant income streams for about one-third of those people. If the company is correct, and if my guesstimates are correct, that could reduce the percentage of people who will need LTC services and have no means to pay for it, even for a year or so, to about 40 percent.
So, what about that 40 percent of the people who need LTC services and have no more ability to pay for it than “flying around the room”?
For them, the true LTC cost planning solution is to have the strongest, most flexible economy we can have. We need to produce hard-working, educated kids.
We need to have financing systems in place to help entrepreneurs start businesses and employ those fine, hard-working kids. We need regulations that are flexible enough to give those entrepreneurs a chance to use the financing to take root and expand.
If employers have the confidence to want to employ workers and pay good wages, then the workers will find some way to scrape up the cash to help their parents, aunts, uncles and grandparents.
Workers who think finding a new job is reasonably easy will have the confidence to take leave from work and act as informal caregivers, when that makes sense.
The supply for LTC services will find a way to meet the demand for LTC services in a fashion that will be far from perfect, but may meet a large percentage of the need for services.
If, on the other hand, we continue to skimp on educating our kids, and we continue to paralyze existing employers and would-be entrepreneurs with a lack of access to capital, rigid business licensing and certification rules, increasingly complicated benefits and employment rules, and rules that encourage commercial property owners to keep buildings empty, then we could put up with many disabled boomers living in boxes on the sidewalk, next to empty commercial buildings, as the young people who could be getting paid to take care of them also sit panhandling nearby.
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