The shadow caregiving system and economy

We do not necessarily use or understand the term “life expectancy” correctly, according to Josh Zumbrun’s Dec. 15, 2023, article in The Wall Street Journal.

About 95% of the time, life expectancy projections are based on the concept of a synthetic or fictitious cohort, according to Michel Guillot, a demographer and professor of sociology at the University of Pennsylvania. Many of the results come from statistics that look at how many people died at each age in a given year and then calculate how long a hypothetical infant would live if those age-specific death rates applied for that infant’s entire life. 

For example, if 1.5% of people aged 65 die in 2024, this period-type calculation assumes 1.5% of babies born this year who are still alive in 65 years will die at that age. It assumes that for today’s babies who won’t actually turn 65 until the late 2080s, neither environmental nor medical progress nor a pandemic or natural disaster will have an effect on their mortality. Guillot suggests that using cohort life expectancy — which requires assumptions about medical advances, natural and man-made disasters, a pandemic, wars, or who knows what — should be considered instead.

What’s the practical implication of all this? No matter which statistic you use in discussions about longevity, health and life planning, or financial longevity planning, advisors and agents (and really everyone else) must plan for extended care needs. Why? Regardless of the statistical measure used in discussions about longevity, health, life planning or financial longevity planning, everyone — including advisors, agents and individuals — must factor in extended care needs. 

The 2023 AARP Public Policy Institute report titled “Valuing the Invaluable” reveals that family caregivers contributed an astonishing 36 billion hours of unpaid care, valued at an estimated $600 billion. This constitutes what I term the shadow caregiving system, creating a substantial $600 billion shadow caregiving economy, a figure expected to grow. This estimate excludes workforce shortages, care-related costs, out-of-pocket expenses, lost wages and disrupted careers. 

The complexity of care, coupled with a shortage of trained caregivers and facilities, exacerbates the situation. Many individuals erroneously believe that Medicare or Medicaid will cover all their long-term care needs. Emotional stress is another factor that is not easily attached to a number and added to these estimates. If your clients are not already part of the shadow caregiving system, it’s likely they will be soon.

What’s the practical application of this? Staying informed about the range of insurance products available is crucial. If you’re uncertain about initiating and sustaining conversations regarding extended care planning, it’s time to catch up. This is a topic that I have researched and written about in my two books: one for professionals, How Not To Tear Your Family Apart, and one written for consumers, How Not To Pull Your Family Apart: A Practical Guide to Caregiving and Financial Stability. Many advisors mentioned that their clients wanted to learn how to approach this topic with family members, which resulted in a third book, How Not To Pull Your Life Apart Caregiving: Overcome Challenges and Objections to Planning Conversations. This opportunity to positively impact your clients’ lives and the lives of care recipients — and by extension their families (no matter how they define family) — is growing every day. 

Longevity can affect insurance funding and legacy planning, leaving no room for negotiation or delay when care needs arise. According to AARP, 53 million individuals assumed the role of family caregivers in 2021. It’s essential to ascertain whether your clients are part of this growing statistic, as these conversations, although challenging, are vital. Numerous resources, including books and articles, offer valuable insights into approaching this topic with clients or their families. Alternatively, collaborating with a trusted colleague specializing in extended or long-term care can provide valuable support.

Remind your clients that caring for oneself and fostering loving relationships, particularly when facing or anticipating extended care needs, are integral parts of love. Assisting clients in developing a comprehensive extended care plan not only communicates your concern for them and their families but also demonstrates your commitment to their well-being.

Carroll Golden, CLU, ChFC, LTCP, CASL, FLMI, CLTC, LACP, is executive director of NAIFA’s Limited and Extended Care Planning Center. She is the author of How Not to Tear Your Family Apart: A Practical Guide to Caregiving and Financial Stability. She may be contacted at [email protected].