The retirement trap

My wife and I just married off our middle son to a terrific girl at the most fun wedding I've ever attended. All eight of my wife's siblings were there, and I just couldn't stop thinking, “How can it be that all these people I've known since they were teenagers have gotten so, well, old?”

That got me wondering about how all these great folks (my in-laws are the best) are going to manage going forward into “hardcore” old age, a.k.a. when they are physically or mentally impaired or incapacitated. I'm almost positive that most of them are in the same denial of aging as I am (very), but they're much more confident in the government's ability to look out for us than I am (not very).

When I recovered from the wedding merriment several days later, I decided to write about some of the pitfalls that veterinarians are likely to encounter as they age and begin to deal with the financial realities of advanced age. After all, the DVM population is much like the group of 150 guests assembled at my son's wedding: many members of the middle class, a few of whom are well-off and a few others who've fallen on difficult economic times now and again.

That really is a key point. When it comes to planning for retirement (which we'll hopefully get to do) and old age (a virtual certainty), there is no one-size-fits-all strategy that applies. As a group, veterinarians bring even more complexity and diversity to the senior-planning game than other folks-they often own a business or a part of a business, sometimes they have family members who are their employees, and they almost always feel they're too busy to put together a concrete plan for old age.

So here for your consideration is a thumbnail sketch of “elder law” as it applies to veterinarians as a subset of the general American population. (It's brief enough to read between office calls, so there's no excuse for procrastination!)

Step 1: Identify your group.

As I mentioned in my example of our wedding attendees, many people-and most veterinarians-are neither rich nor poor. Many of us fall in that large, difficult-to-define, “average” group that some might call “middle class.” I've never known the exact definition of this group. I do know one thing for certain, though: It's this middle group that needs to engage in elder planning. It's this middle group that will be called upon to look out for themselves in older age. And especially, it's the members of this group that will be victimized by arcane laws and convoluted government bureaucracies if they fail to think ahead.

Think about it this way: With advancing age and approaching physical deterioration, people have to focus increasingly on the essentials of life. They must have food and shelter and, eventually, hands-on assistance with basic daily activities. The rich and many of the poor are actually relatively well-positioned to deal with those issues.

Take, for example, a veterinarian who has worked hard throughout life, saving and investing carefully. I used to do relief work for such a veterinarian, and she used to say she would retire once she had $5 million in net worth. She retired recently, so I figure she must have hit her target.

For this doctor, an investment in a fixed income security that pays 3 percent would yield a regular cash stream of $150,000 per year. That money would be available to pay for a protracted nursing home stay or to cover rent in an assisted living facility. So for this doctor, preplanning and a long-term care insurance policy might be worthwhile ideas but probably are not essential. The rich are, for lack of a better term, “self-insured.”

Veterinarians who have struggled financially over the years-for any number of reasons-may also get away without giving elder law a lot of thought. The American medical care system, with its many flaws, still generally provides care for anyone who is genuinely indigent.

Indeed, I've known veterinarians who have worked hard over a long lifespan but never gave a lot of thought to their financial futures. A number of them eventually came to be entirely dependent on the social safety net when they became too frail to practice or even to live alone. For such individuals, Medicaid (the federal program designed to provide healthcare for the poor) is currently available to pay long-term care costs. I use the word “currently” because the system is financially overburdened, and it's not likely to continue functioning at the status quo for much longer.

And therein lies the trap! A huge number of middle-class veterinarians mistakenly believe that no elder planning is really needed, because when our old age hits, either we will: 1) be able to rely on Medicare (the federal program that provides medical care for seniors) to pay for a nursing home, or 2) be able to jostle around whatever money and property we have through the making of “gifts” to one relative or another, thereby allowing us to qualify for Medicaid as a “poor” person.

My esteemed colleagues, those assumptions contain so many flaws and errors, I hardly know where to begin.

Step 2: Open up the darn newspaper

Really, what part of “the government is broke” don't we all understand? Does any rational person (let alone one with an eight-year college degree) actually believe that the costs of feeding, maintaining and caring for an ever-aging population can actually be paid for by whatever crumbs are left after all the seniors give away their homes and bank accounts to children and subsequently go “on the dole” for years or decades of high-intensity care?

The Medicaid law is routinely being amended to give Uncle Sam greater and greater ability to get his hands on property transferred to relatives or trusts prior to a nursing home stay. For example, many people think an individual retirement account (IRA) is exempt from attachment by Medicaid to reimburse the system for nursing home care. That's true-sort of. But do you remember that IRAs have an annual required minimum distribution (RMD), which must be paid out to the IRA owner after he or she reaches age 70 ½? Medicaid gets all of that. And after a few years of RMD payments, virtually all of the IRA account is exhausted.

Now, as for Medicare, it covers less and less all the time as the program experiences greater and greater revenue shortfalls. And trust me; it will continue to cover even less in the future. Undoubtedly seniors will have to wait to older and older ages to qualify for benefits.  

Additionally, here's a news flash for those of you counting on Medicare to take care of your nursing home tuition: Medicare rarely pays for nursing home stays anyhow. Truth is, you can't just call them up and say, “Gee, I'm afraid I can't cook for myself anymore, so I'm headed to Good Shepherd-expect bills to start showing up at your Medicare bookkeeper office.” Actually, Medicare pays only if the patient goes to a nursing facility very shortly after a hospital stay. And the nursing home care ordinarily must be “therapeutic” in nature, or Medicare won't cover it.

Step 3: Imagine old age realistically

What will you really want in old age? How will you want to live? In order to have that old-age reality be anything like you've imagined, you'd better either win the lottery or start planning early. Here are a few things many of my veterinarian clients say they hope for as they grow older:

“I'd like to protect my house so it can go to my kids.” Don't wait until you're sick and feeble to look into strategies to protect that house from Medicaid and the nursing home. Medicaid already has a “look-back” provision, which severely limits its obligation to pay for nursing home care after a house or other assets are gifted away. It used to be a year. Then it was about three years. Now it's five years. Think Congress is finished tightening that thumbscrew? Don't bet a trillion or so on it.

“If I have to be in a nursing home, I want one in a warm place with lots of windows, compassionate staff and good food.” Good luck with that if you don't have any long-term care insurance. Pretend for a minute that, instead of going to veterinary school, you went into the quality nursing home ownership game. Would you give preference to seriously ill potential customers subsidized by minimum Medicare reimbursement rates? Or would you be trying to fill your beds with guys like that nice, relatively healthy Dr. Jones who sports an inflation-adjusted guaranteed-per-day payment Mass Mutual Insurance long-term care policy?

“My preference would be to have skilled nursing care at home, not in an institution.” If that's you, I suggest you either move to Norway or buy a long-term care policy. Medicaid and Medicare almost never cover in-home, 24-hour care. How could they possibly? Medicare was designed to cover people older than 65 at a time when almost nobody lived to be 65. Medicaid was designed to provide for people who were genuinely needy through no fault of their own.

Gee, I just can't believe that those programs are going broke.