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Who will pay for your retirement?
by Dan Gunderson, Minnesota Public Radio
March 17, 2004

Caring for senior citizens could bankrupt Minnesota as baby boomers retire. Studies show many people aren't saving enough for retirement. Minnesota officials are trying to spark a public debate with a series of informational meetings around the state.

Moorhead, Minn. — About 10 years ago, Tom and Diane Williams of Moorhead decided they should be better prepared for retirement, so they bought a long term care insurance policy.

If they need nursing home care, or help to stay in their own home, they expect at least part of the cost to be covered by insurance.

"We both come from families that have had some very long-living older people," says Tom Williams. "And if we carry on that long, we'd like to not be a great drain on our children ultimately, or even society. Long term care insurance seemed to be a reasonable thing to do."

"We've done something toward taking care of this ourselves, rather than just waiting to see what the social net will provide," adds Diane.

It's not the easiest sell because it's a lot easier to think about your immediate needs. But, I think right now baby boomers are starting to recognize they are not going to live forever. Their parents are getting ill and dying, so they're beginning to recognize this is something they need to plan for themselves. - LaRae Knatterud

Tom and Diane Williams are in the minority. By some estimates, only about one in 10 Americans have long term care insurance. Some experts say insurance is not the only solution, and for some people it's not the best solution.

Insurance may work for some people, while others may benefit from a reverse mortgage on their home. Most will need some combination of private funds and government assistance to pay for long term care, says Susan Polniaszek, vice president for long term care with the National Council on Aging.

It's important to carefully research options before investing in a long term care plan, she adds.

"Some of these companies are lowballing the premiums, and they're not going to have enough money to pay the services people are buying. And they run the risk of having to raise premiums 20 years later," says Polniaszek. "Meanwhile I've budgeted so much a month for paying a policy, and suddenly it triples and I don't have the money to pay for it. I'll drop that policy just when I need it the most."

Government needs to provide more education about options, and more incentives for people to plan how they'll pay for long term care, according to Polniaszek.

LaRae Knatterud understands the daunting challenge of getting people to think about a financial crisis 20 years away. Knatterud heads an aging initiative for the Minnesota Department of Human Services.

"It's not the easiest sell, because it's a lot easier to think about your immediate needs," says Knatterud. "But, I think right now baby boomers are starting to recognize they are not going to live forever. Their parents are getting ill and dying, so they're beginning to recognize this is something they need to plan for themselves."

Baby boomers want more choices than their parents had, according to Knatterud, and they want to stay independent as long as possible.

That means a shift away from the traditional long stay in a nursing home. It also means people who plan for retirement will have more options about the care they can afford.

Minnesotans need to talk about the best ways to pay for that care without bankrupting the state, says Knatterud.

Should government offer more incentives for people to save? Should the state mandate long term care insurance? Should there be tax breaks for adult children who care for their parents?

Those options and many more will likely be debated in the next few years, as policymakers wrestle with how to avoid the budget crisis looming on the horizon.

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