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OCTOBER 30, 1995

Starting Out: Book gets seniors prepared for day they hope never comes


By Tricia Serju
Imagine taking time to set savings goals, only to have a disability or an illness sap the life out of your retirement plans.

The money could go to take care of a spouse or other family member. Or perhaps you will need special care after you've reached retirement age.

Author Kenneth Stern provides a guide to everything seniors need to know to make the federal entitlement system work for them in his new book, Safeguard Your Hard Earned Savings (Career Press, $11).

"Nobody likes to think about it, but the reality is that far too often bad things happen to good people," Stern said. "The only way to truly make the fear and anxiety go away is to educate and prepare yourself for whatever the future might hold."

Nearly half of everyone over the age of 65 will need some type of long-term care, and some 50 percent of the people who enter nursing homes will deplete all their savings within six months, Stern said.

The elderly population in the United States increased to 33 million in 1990 from 26 million in 1980. By the year 2020, this number is expected to exceed 52 million, he said.

The book provides information on federal disability benefits, long-term care provided by Medicare and details about Social Security.

Other topics include:

* Choosing among assisted living, independent living and retirement communities. To evaluate a retirement community, ask yourself will you enjoy it? What is the cost? What are your plans if one spouse gets sick or dies?

Stern suggests visiting several communities and talking to residents. Narrow your selection down to a few in the area and then begin negotiating. Tell the representative you are considering other communities. They then will make you an offer or a counteroffer.

"You may want to counteroffer for 10 to 15 percent less than the figure you're quoted by the community representative," he said. "He or she may offer to throw in some extras for the quoted prices, such as upgraded carpet, or a washer and dryer."

* Long-term care costs can decimate your personal assets if you don't prepare.

"There are several ways to pay for long-term care ... private insurance, government assistance, special-care arrangements and savings," Stern said.

Eric Berry, director of the estate and local affairs division in the Office of Services to the Aging in Lansing, advised that planning ahead shouldn't be only a concern for older people.

"Catastrophic insurance is available at any age," he said.

* Medicaid can signficantly reduce the cost of health care, but you might end up losing all of your assets if you don't know how it works. Medicaid is a public benefit program that pays certain medical costs when an individual does not have the financial resources to pay.

Consider how to distribute your assets to ensure that you qualify Medicaid but keep some money. Medicaid allows married people to keep "exempt assets" when they apply for and receive benefits. For instance, your personal residence, one car, certain jewelry and certain irrevocable trusts are considered exempt assets.

"While Medicaid is designed to allow a spouse to keep a certain amount of assets, stricter rules apply to single individuals, widows or widowers," Stern said.

Indeed, the only choice that single people may have is to give away their money three years before applying for Medicaid. Stern advised using estate planning tools such as trusts to maintain your personal residence, creating a charitable trust or owning a trust in another country.

* Power of attorney and other critical documents.

"You have the power to protect your assets if you should become disabled or otherwise incapacitated," Stern said. "You have to use this power, however, before you are disabled."

With a power of attorney, you can arrange for your business or personal affairs to be handled in case you are unable to help yourself. Some power of attorney papers take place at all times, others only after a person has been incapacitated. It ceases after a person dies.

"You might want to explore limiting that power of attorney to health issues," Berry said. "It's an alternative to a living will, which is not allowed in Michigan."

* Nursing home advocacy and patient's rights.

"The average annual cost of long-term care can range from $36,000 to $60,000," he said. "That doesn't even include all the extra expenses and incidentals, such as grooming, gifts and medical supplies that the sick patient will need."

Tricia Serju is a Detroit News business reporter. Starting Out appears each Monday in Strategies. Send ideas or comments to her at The Detroit News, 615 W. Lafayette, Detroit, MI 48226.

Services for elderly

* For information on coordinating services for older Americans, contact the Office of Services to the Aging, 611 W. Ottawa St., Box 30026, Lansing, MI 48909. Call (517) 373-8230.

* For information on long-term care ombudsman programs, contact Citizens for Better Care, 416 N. Homer St., Suite 101, Lansing, MI 48912-4716. Call (517) 336-6753.

* Contact the advocacy group Citizens for Better Care at (800) 292-7852 or (517) 336-6753.

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