The Sandwich Generation

Sandwiched
Tom has just learned his 83-year old mother, Sarah, has Alzheimer's Disease and requires full-time care. He's devastated by the news and overwhelmed by the decisions he must make regarding her care and finances. He's always considered himself to be a planner – someone who anticipates and is prepared – but suddenly, he finds himself feeling very much unprepared.

Tom is an only child. He's 53, divorced and has recently started his own business. He has two children: a son in second-year university and a daughter who will start university next year. He leads a busy life, juggling work commitments and his responsibilities as a father, which doesn't leave him with much time for anything else. His financial advisor, Rob, manages his investment portfolio to pay for his children's university education and finance his retirement. Retiring early is important to Tom, who, having watched his father work until he was 65 and die shortly thereafter, has decided to take early retirement at age 60 to enjoy life while he is still young and healthy.

Next steps
Tom begins to consider options for his mother's full-time care. Emotionally, he's feeling stressed as he deals with the additional pressures of a dependent parent. His mother's doctor has recommended Sarah be placed in a nursing home for her own health and safety. Tom accepts that he doesn't have the time or the means to provide his mother with the level of care she requires, nor does he want to burden his children with care-giving responsibilities. With that decision made, he takes time off from his business and begins his search for a nursing home. He finds one that he feels will provide his mother with he care she needs and is also close to his home, making visits easier. The cost is $1,800 per month ($21,600 per year).

The advice of a financial advisor
Naturally, Tom is concerned about how to pay for Sarah's full-time care. He has power of attorney for her financial affairs, but he's not sure if she has sufficient assets to pay for her care for the rest of her life. He's also concerned about managing her finances because he has such little time these days.

Tom contacts his financial advisor, Rob. They meet to discuss Sarah's need for full-time nursing care and review her finances. After careful consideration, Rob recommends an annuity funded by a portion of Sarah's assets as the solution that will ensure Sarah's nursing care expenses are covered for as long as she lives.

Annuities to the rescue!
Rob explains that an annuity is like a mortgage payment that works in reverse. Instead of borrowing money, you invest money with a financial institution. The financial institution will then make regular income payments back to you that contain both interest and principal. But, unlike a mortgage that would typically end after a specific period, payments from an annuity can be guaranteed for the rest of your life.

Rob goes on to explain that an accelerated (or impaired) annuity, offered by an insurance company, is a special annuity for people with serious health impairments. An individual with a shortened life expectancy would receive a higher lifetime income payment than a healthy person for the same up-front investment cost. Alternatively, an individual may choose to receive the same lifetime income payment as a healthy person, but pay a lower up-front cost. If required, these special annuities can be indexed to provide increasing income.

Rob does some research and finds a traditional annuity would cover the cost of Sarah's nursing care; however, the total up-front cost would be $166,322. The cost is based on her age, but does not take her health into consideration.

The perfect solution for Sarah
Rob finds that, based on her health, Sarah qualifies for an accelerated annuity. This accelerated annuity would provide Sarah with the same lifetime income payment as the traditional annuity, but the upfront cost would be only $72,589 – a difference of $93,733.*

To learn more about how accelerated annuities can provide you and your family with financial protection and peace of mind, contact your financial advisor.

*The up-front investment is based on an 83-year old woman with severe Alzheimer's who requires Level 3 skilled nursing care and a three-year guarantee period. Upon death, payments will continue for the remainder of the guarantee period (if any) and then end with no cash surrender value. Figures shown as of February 3, 2006 are for illustrative purposes only and are not guaranteed. Interest rates are subject to change and full medical underwriting is required upon application.

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