Tag Archives: long term care

If you’re in your 50s, you need to plan for long-term care right now

My Comments: “Who me? Nah, I’m good. I’m not going to become goofy or worry about someone helping me take my meds every morning. Or help me prepare my meals. Or help me in the shower…”

(BTW, this image is of my mother who suffered from Alzheimers for 10 years after my father died.)

by Carmen Reinicke \ June 22, 2018

More money doesn’t always lead to more planning, especially when it comes to unpopular subjects like end-of-life care.

Less than a quarter of high net worth clients currently have plans for long-term care in place, according to a poll of financial advisors by Key Private Bank, the wealth management arm of KeyCorp.

The poll surveyed nearly 150 advisors about their experiences with high net worth clients, those with assets over $1 million.

Advisors said persuading clients to devise plans for long-term care is a challenge. They also said it is difficult to balance saving for long-term care with other financial goals such as saving for college or buying a house.

“Part of it has to be the typical head-in-the-sand approach,” said Chad Stevens, senior financial planner at Key Private Bank. “‘If I ignore it, it’ll go away.'”

Having tough conversations is part of the job of an advisor, and it’s important to talk about the financial risks of aging, said Stevens.

“Unless you plan now, you can’t be sure that your goals will be accomplished,” Stevens said.

Plan carefully
It is important to make sure that your financial goals align with your lifestyle goals for retirement and end-of-life care.

Most clients said their top choice for long-term care is to stay in their own home and be fully independent, according to the survey. But this wish may be unrealistic; more than half of people over age 65 today will need long-term care at some point, according to AARP, a nonprofit advocacy group for in older Americans.

The second most popular choice is to move into an assisted living facility, followed by staying at home with the help of family members and personal aids.

The projected costs of long-term care are increasing, according to a report by Genworth Financial, an insurance company. In 2017, the median annual cost of a home health aide was $49,192, and the median cost of a private room in a nursing home was $97,455. By 2027, the median annual cost of a home health aide is expected to be $66,110, while the median cost of a private room in a nursing home will be $130,971 per year.

“Many underestimate the costs or think that Medicare or health insurance will cover it,” said Jean Accius, vice president of long-term services and supports at the AARP Public Policy Institute, which does public policy research, analysis and development at AARP.

But, that is not always the case, Accius said.

Most people “think they’ve prepared but when something happens they don’t have nearly enough,” said Amy Fuchs, an aging life-care expert. She also said that when people sign up for long-term life insurance without thinking through what their needs will be later in life, they might think they are covered when they are not.

If clients don’t prepare for these costs, they may end up paying out of pocket. This can quickly eat into their savings and negatively affect other financial goals.

“If leaving a financial legacy for your family is important, you need to plan ahead for that,” said Debra Drelich, who runs a private practice called New York Elder Care Consultants LLC.

Start early

Advisors recommend that clients start planning for long-term care years before they think they will need it. The most robust planning sessions should occur between ages 40 and 50.

“Don’t avoid the conversation,” said Stevens from Key Private Bank. “Find a trusted advisor that will give you an idea of what plans are out there so you can make an educated decision.”

Starting early will give you more time to assess what the options are in your home city and state, because location can greatly limit what services are available.

“Where you live matters — it limits your choices and options,” said Accius. He said many resources are available for families who want to begin planning, including the AARP scorecard, which ranks states based on the long-term services they provide.

An early start will also help if you decide to buy long-term care insurance; the younger and healthier you are when you purchase, the lower the cost will be.

Having a plan is the best way to ensure that the late years of your life are as smooth as possible, according to financial advisors and aging life care experts.

“We plan for weddings and we plan for graduations, and we do it very thoughtfully,” said Anne Sansevero, a geriatric nurse practitioner and founder and CEO of HealthSense LLC, an aging life care management consulting company. “But this is our life, our years ahead.”

“Just like saving for retirement, you have to save for your health and well-being,” she said.

Communicate with family

Beyond having a plan, it is important to communicate your wishes for long-term care with your family, financial advisors and aging life care professionals say. Few advisors report that their clients are communicating with their families about their wishes for long-term care, according to the Key survey.

“Sometimes older adults don’t let their kids in and provide them with that information, so the kids have no idea,” said Debra Feldman, an aging life care professional and founder and president of her own firm, Debra D. Feldman and Associates.

She said that if older adults are not initiating the conversation, children should come to their parents. Waiting too long can lead to scrambling in a time of crisis, she said.

Having your family on the same page will alleviate stress and pressure and allow everyone to enjoy the golden years of your life more.

“Talking through long-term care desires early-on with family members will be crucial to setting expectations, delegating responsibilities and avoiding misunderstandings or surprises,” said Stevens.

Source: https://www.cnbc.com/2018/06/22/if-youre-in-your-50s-you-need-to-plan-for-long-term-care-right-now.html


Paying for Long Term Care with a Hybrid Life Insurance Policy

My Comments: Long Term Care and the associated costs have become an increasingly obvious existential risk faced by people in retirement. We’re living longer and longer and despite our best efforts, we tend to become more goofy and less healthy as we age.

If we can no longer function on our own, of if we have a family member capable of helping, there is still the need for timely and sometimes extended assistance. Mindful we’re in an essentially free market economy, someone is going to have to pay for that assistance when our family members are exhausted.

Medicare does not have a mandate to care for us. Medicaid does have such a mandate but before it comes into play, we have to almost exhaust our personal resources before we become eligible.

So what is the best way to pay for it? The insurance industry has increasingly experienced a burnout and many companies have dropped out of the business. Those who remain are increasing their premiums along the lines of 12% or more every year. That’s hard on most consumers. Here’s a viable option but you need to buy it while you still can.

The embedded video below features Jamie Hopkins of The American College. This is the organization where I earned by CLU and ChFC designations some 40 years ago.

by Jamie Hopkins – Professor of Retirement at The American College – October 10, 2018

While traditional stand-alone long-term care insurance (LTC) products have seen a drop in popularity in the past several years as a result of companies leaving the marketplace and of spiraling policy premiums, life insurance-backed long-term care financing strategies have experienced tremendous growth. In 2017, life-LTC hybrid policies increased by about 5 percent to 260,000 new policies sold. To put this in perspective, only 70,000 stand-alone policies were sold in 2017, but over 750,000 had been sold back in 2000. Furthermore, new premiums paid for these hybrid policies increased by over 18 percent, and about 25 percent of all new U.S. life insurance premiums paid went to policies that offer benefits for long-term care or chronic illness. While there have been a few new products developed in the stand-alone long-term care insurance market like one rolled out in the summer of 2018 by New York Life, most of the recent developments have been in the hybrid-based life insurance market.

Despite the growth of the life-LTC hybrid policy marketplace, many people still do not have a definitive understanding of the differences in options now available. Generally speaking, life insurance-based long-term care combination products (often called hybrid or asset-based products) fall into two main categories: 1) linked-benefit products under 26 U.S.C. § 7702(b) and 2) accelerated death-benefit riders under 26 U.S.C. § 101(g). Linked benefits under 7702(b) are closer to true long-term care benefits and can be marketed as such, while accelerated death-benefit or chronic illness riders under 101(g) cannot be marketed as long-term care insurance, even though the benefits can be used for long-term care expenses.

The more common type of benefit on existing life insurance policies is the 101(g) accelerated death-benefit rider. These riders often have no additional up-front charge and are just included as part of the policy; however, this is not always the case, as some policies do charge extra for the rider up front. The rider cannot be marketed as long-term care coverage and the policy cannot pay out anything in excess of the life insurance death-benefit face amount. Typically, the amount of money that can be accelerated and paid out before death is determined by a number of factors including age, gender, class of policy, interest rate, and policy death-benefit amount. All accelerated benefits for chronic illness require indemnity payment. (Indemnity pays a monthly or daily cash benefit and reimbursement pays benefits based on actual incurred expenses). For instance, the higher the interest rate and the younger you are when you file a claim for accelerated death benefits, the more the death benefit will be discounted.

“There are a growing number of insurers offering optional 101(g) riders that are underwritten, charge a premium and permit the acceleration of the entire death benefit without requiring that the condition be deemed permanent. Typically, 2 percent, 4 percent or the HIPAA daily maximum can be selected at the time of policy issue,” says Bill Borton, a long-term care specialist at W.R. Borton & Associates in Marlton, N.J. “Boomers like them because they are indemnity and pay cash, rather than the 7702(b) riders that typically reimburse care from qualified caregivers.”

Under a chronic illness rider, the individual must be certified as “chronically ill” by a licensed health care practitioner as being unable to perform at least two activities of daily living, be disabled at a similar level, or have severe cognitive impairment. Activities of daily living are defined as 1) eating, 2) toileting, 3) transferring, 4) bathing, 5) dressing, and 6) continence. The receipt of benefits is generally treated as income tax free as long as they do not exceed certain HIPAA daily limits.

How to Prepare for Costs Medicare Won’t Cover

My Comments: Health issues in retirement are a given for those of us not already passed. Whether they end up costing an arm and a leg depends to some extent on how prepared we are before they happen.

Both my wife and I are covered by Medicare and each of us has a ‘medigap’ insurance policy, designed to cover most of what Medicare does not cover. But make no mistake, between the Medicare Part B premiums and the ‘medigap’ policy, it still represents a significant monthly outlay if you don’t think of yourself as financially comfortable.

And then there is Medicare Part D which covers prescription drugs. My wife is a diabetic, and that too can be very expensive. She and I both elected to purchase a Part D plan. All this assumes you have the resources to pay the extra premiums.

As for Medicare Part C coverage, or Advantage Plans, I have a bias against them so we didn’t go that route. But that’s a personal preference.

The real benefit to me for having what we have is that when we decide we need to speak to one of our many physicians, the out-of-pocket expense is not a deterrant. Being able to deal with health issues as they surface provides real peace of mind as the years flow by.

Katie Brockman Aug 19, 2018

When you think about how you’ll spend your retirement savings, you probably imagine traveling the world, getting more involved in your hobbies, or spoiling your grandchildren. What you probably don’t envision is spending every spare dime on healthcare expenses.

Unfortunately, that’s the ugly reality some retirees face.

The average 65-year-old couple retiring today can expect to spend roughly $280,000 on healthcare during retirement, according to a recent report from Fidelity Investments. That includes costs like premiums, deductibles, and other out-of-pocket expenses.

This may come as a shock to some, as many people mistakenly believe that Medicare will cover all their healthcare expenses during retirement. The truth is that while Medicare can offer significant financial assistance, it doesn’t cover everything. And some of the costs it doesn’t cover can put a serious crack in your nest egg.

What Medicare does (and doesn’t) cover

First, it’s important to understand what Medicare does cover and how much you’re paying for it. Original Medicare consists of Part A and Part B. Part A covers hospital visits, visits to skilled-nursing facilities, and in-home healthcare services. As long as you’ve been working and paying taxes for at least 10 years, you generally don’t need to pay a premium for Part A coverage. You do have a deductible for each benefit period, though, and for 2018, that deductible is $1,340. Also, if you have to spend an extended period of time in a hospital or skilled-nursing facility (typically longer than 60 days for hospital stays and 20 days for visits to a skilled-nursing facility), you may have to make coinsurance payments, which range from $167 to $670 per day — or Medicare may not cover your stay at all.

Part B covers more routine care, like doctor visits and flu shots, and the amount each person pays varies based on their income. Those earning less than $85,000 per year (or $170,000 for married couples filing jointly) pay $134 per month for Part B premiums. You also have to pay a yearly deductible, which for 2018 is $183. After you meet that deductible, you pay 20% of the remaining expenses.

You also have the option of enrolling in Part D, which covers prescription drugs. This coverage is provided by private insurance companies, though, so the amount you pay will vary widely depending on which plan you have.

Even considering all that Medicare Part A and Part B cover, there’s a variety of expenses that basic Medicare won’t touch. For example, you still need to pay for all copayments, deductibles, and coinsurance out of pocket, and those costs can add up quickly. You’re also not even eligible to enroll in Medicare until you turn 65, so if you retire before that and lose your health insurance when you leave your job, you’ll need to find coverage outside of Medicare.

Then there are healthcare expenses that most people don’t realize aren’t covered. Most dental care, for example, isn’t covered by Medicare, and neither are eye exams, hearing aids and exams, dentures, or long-term care.

These aren’t necessarily hard rules, because there are always exceptions. Expenses that are considered medically necessary are often covered by Medicare, while routine care is not. So if, for example, you have a dental emergency, then Medicare may pick up the tab, but if you simply get your teeth cleaned or have a cavity filled, then you’ll likely need to pay for that out of pocket. And even routine care can cost hundreds of dollars per visit. If you’re not prepared for those expenses, they can drain your savings quickly.

Don’t let healthcare costs catch you off guard

The best way to avoid paying tens (or hundreds) of thousands of dollars in healthcare costs is to do your research, understand what Medicare does and doesn’t cover, and figure out how to pay for uncovered medical care before you retire.

One option is to enroll in a Medicare Advantage Plan (also known as Medicare Part C). A Medicare Advantage Plan is a health plan offered through private insurance companies that includes all the benefits of Medicare Part A and Part B, as well as some additional coverage for vision, hearing, and dental. Advantage Plans are similar to the insurance plans you likely enrolled in while you were working: You have to visit a doctor within your plan’s network or risk not being covered, and the premiums and deductibles vary by plan and provider.

Although prices vary, you typically get more coverage with an Advantage Plan. Depending on the type of care you need, it could be worth it to pay more for an Advantage Plan in order to pay much less out of pocket for routine care.

Another option is to use a health savings account (HSA) to cover some of your medical expenses. An HSA is essentially a retirement savings account just for healthcare costs. You’re eligible for an HSA if you have a high-deductible health insurance plan, and for 2018, that means you have a deductible of $1,350 for an individual or $2,700 for a family, as well as maximum out-of-pocket costs of $6,650 or $13,300 for an individual or family, respectively.

If you’re eligible to open an HSA, you can contribute up to $3,450 per year (or $6,850 for family health plans) in pre-tax dollars. Those aged 50 and over can contribute an extra $1,000 per year. When you withdraw the funds, so long as you spend them on qualified medical expenses, you don’t need to pay taxes on withdrawals either.

Regardless of which route you choose, it’s crucial to have a plan in place. If you go into retirement assuming you won’t need to pay a dime more in medical expenses than you used to, you’ll be in for a rude awakening. But if you prepare yourself and come up with a plan before you make the leap into retirement, your wallet will thank you.

Source: https://www.fool.com/retirement/2018/08/19/how-to-prepare-for-costs-medicare-wont-cover.aspx

What Is Missing From Most Retirement Advice

Tony’s thoughts about this: For those of you who have not yet ‘retired’, know that it will be dramatically different from your ‘before retired’ years. Planning for those years, if you expect to enjoy life and consider your retirement a success, is essential.

My days as an active, looking for new clients financial person are on the wane. But my interest in taking care of existing clients and finding ways to help others have not diminished. To that end I offer you these useful comments from Kevin Brock.

Kevin Bock, Impact Partners, July 5, 2018

After nearly 30 years in retirement and legacy planning, I’ve noticed some common threads that could devastate many retirement plans! Most people don’t know where to turn or what to expect as they get closer to retirement, and they may think that they have everything taken care of … Wrong!

Before we proceed, here are some thoughts on the two main professionals who many people think have everything taken care of for them.

If you’ve met with your lawyer and think you have everything taken care of, ask yourself: Are they licensed to give financial/insurance advice? Most aren’t. Do they have a working knowledge of taxes and how to minimize or potentially avoid them? Is their main source of income from retirement and estate planning (not administration), or do they do other things and use wills and estates as just a sideline?

If you’ve been working with an investment advisor, have they coordinated a plan that covers income planning, asset planning, tax planning, health care planning, legacy planning, and legal planning? I believe these are the 6 most important parts of proper retirement and estate planing!

Now: Do you still think everything is taken care of?

As we mature and become retirees, things change. Our needs change; our wants and desires change; our goals change … and our retirement and estate plans need to change to meet these new needs, wants, desires, goals, and concerns!

As we age, we may need others to help us occasionally. We may eventually need help with daily living activities, like eating, bathing, dressing, toileting, transferring, and maintaining continence. Some other considerations may be the need for mental support or companionship, transportation, meal preparation, managing household needs (cleaning, laundry, trash, yard maintenance, etc.), help with medication, finances, and more!

Does your lawyer or advisor have a depth of knowledge in these areas, and can they direct you to quality resources that can help with in-home care, personal care homes, or assisted living placement when staying at home is no longer an option?

So, do you really have everything taken care of?

A good retirement and estate plan should cover most, if not all, of the above areas. You should have a good way to access these resources when needed.

Another area that may be important is protecting your assets from creditors, family members, catastrophic medical expenses, and taxes. For example, did you know that probate and inheritance taxes are optional and can often be reduced or eliminated with proper planning?

So far, is everything taken care of?

Have you ever known someone who was left with a mess when their loved one passed? Their estate may have been substantially reduced by fees and taxes, and the confusion may have taken years to clear up because the family contested a will. The family split up because of arguments, many times because things aren’t spelled out in detail in the last wishes. Most parents don’t want strife after they pass, but fighting and arguing is not a rarity! Simple planning gets simple results. Effective planning gets effective results.

Did you know that when some people die, their estates can become public knowledge at the courthouse? In my experience, I have seen salespeople go to the courthouse to find out who got what, get their personal information, and call them to sell them windows, siding, doors, or whatever else. If you have a will, it will most likely direct your estate into probate, be delayed, and become public knowledge.

Did you know that, with proper planning and beneficiary designations, you could keep your estate private? With proper planning, it can be distributed in a few weeks or months instead of 1-2 years or more!

So, how do you find a professional who can handle most or all of your future needs? It can be difficult. People want more of their needs handled under one roof or with one professional who is knowledgeable about what is available in the categories I mentioned above.

When you are searching for a professional to help you with your retirement journey, ask them how much experience they have with income planning and guaranteed income you cannot outlive, asset planning, tax reduction planning, health care planning, legacy planning, and legal planning. Find a professional with a depth of knowledge in as many of these areas as possible. They don’t have to be a CPA or an attorney, and you may need to include these qualified advisors in your plan. If your main advisor has a working knowledge in all of the above areas, you can potentially reduce holes, gaps, and problems that can derail your wants, needs, goals, and desires in retirement.

In nearly 30 years, we rarely have had someone come into our office who truly had everything taken care of. There is no perfect plan, but there are effective plans that can reduce surprises in the future!

Here’s What the Average Retiree Spends on Healthcare Each Year Hint: It’s not a small number.

My Comments: As you approach phase two of your adult life, please understand that the economic and financial dynamics can change dramatically.

Retirement is when you have effectively turned off the ‘work for money’ switch and have turned on the ‘money works for you’ switch. That implies you have money and credits in place to pay your bills.

Unless you’re OK with wandering off into the woods to die, health care costs are going to continue and potentially become a noose around your neck. Just know that if you are alive and well today, the day will arrive when you’re not, and in the interim, you’re likely to have a few medical care visits from time to time, and those people do not work for free. Those that do may not provide you with good care.

Maurie Backman Jul 22, 2018

It’s natural to assume that our living costs will mostly go down in retirement, but if there’s one expense that’s likely to rise during your golden years, it’s healthcare. From deductibles to copays to Medicare premiums, healthcare can easily grow to become your single greatest monthly expense — but planning for it can help alleviate some of the stress it causes so many seniors.

So how much money should you expect to allocate to medical costs? The average retiree spends $4,300 on out-of-pocket healthcare expenses each year, according to the Center for Retirement Research at Boston College. Given that the average Social Security recipient collects just under $17,000 a year in benefits, that’s a large chunk of that income to be spending.

Now the good news is that you can take steps to save money on healthcare in retirement. But while you’re optimizing those strategies, be sure to work on boosting your income as well so that you have the means of paying for whatever costs do inevitably come your way.

Make sure you’re financially prepared for retirement

It stands to reason that the more money you have available in retirement, the less worrisome the notion of covering your medical costs will be. And in that regard, padding your nest egg during your working years is really your best bet.

Currently, workers under 50 can save up to $18,500 per year in a 401(k) and $5,500 in an IRA. For workers 50 and over, these limits increase to $24,500 and $6,500, respectively. If you’re 55 years old and are able to max out a 401(k) for the next decade, you’ll add $338,000 to your nest egg, assuming your investments grow at an average rate of 7% a year during that time.

While you’re working on boosting your retirement savings, start thinking about other income streams you might set yourself up to optimize during your golden years. Maybe you have a home you’re willing to rent out or a hobby you can monetize to drum up extra cash. The key is to get a little creative, especially if you’re nearing retirement and don’t have a lot of time to pad your savings the way you’d like.

But don’t forget about Social Security, either. There are ways you can grow your benefits and get more money out of the program to cover your various living expenses, healthcare included.

If you delay filing for benefits past what’s considered full retirement age, those benefits will go up by 8% a year until you reach age 70. This means that if your full retirement age is 67 and you wait a full three years, you’ll boost your benefits by 24%, and that increase will remain in effect for the rest of your life. Fighting for more money at work will also help your benefits go up, since they’re calculated based on your earnings record.

Take good care of your health

While going into retirement with the highest level of savings possible will help make your medical costs more manageable, another important step to take is keeping tabs on your health as you age. All too often, we neglect medical issues because we don’t want to be bothered with waiting at the doctor’s office or don’t want to dish out a pesky copay. But when you let medical problems linger, they tend to escalate, and once that happens, they can become costlier to treat.

Case in point: A nasty cut on your leg might cost you a $25 doctor visit and a $10 bottle of antibiotics. But if you ignore that cut and it gets infected, you could wind up with a $1,200 ER bill. Of course, this applies whether you’re mid-career or on the verge of retirement, but since our health tends to decline as we age, it pays to be even more vigilant when you’re older.

There’s no question about it: Healthcare is a whopping expense that’s pretty much unavoidable for retirees. But there’s no need to let it ruin your golden years. Read up on how Medicare works so you know what to expect from it, save aggressively, and be vigilant about health problems that inevitably arise. With any luck, you’ll be well prepared to tackle those medical bills once your career comes to a close.

Source: https://www.fool.com/retirement/2018/07/22/heres-what-the-average-retiree-spends-on-healthcar.aspx

The 1 Retirement Expense We’re Still Not Preparing For

My Comments: Those of us who live long enough to enter the final stages of our lives get to confront something that rarely happens to those not retired.

I often refer to this as ‘becoming goofy’, though it’s not always a mental affliction. (My mother had Alzheimer’s and needed constant attention for over nine years.)

As you have long since discovered, being alive can expose you to a double edged sword. Yes, we’re still on this side of the grass but with that comes new challenges.

As a financial planner now focused on retirement planning, not dying quickly comes with a cost. And costs often come with price tags, many of which we’re unprepared to pay.

These words from Maurie Backman are a necessary read. It’s unrealistic to expect bad things won’t happen to us, and to the extent we can be ready if they happen, it will be good for us and our children to take some necessary steps in advance to reduce or eliminate the inevitable financial pain.

Maurie Backman | May 24, 2018

No matter what sort of lifestyle you lead, retirement is an expensive prospect. And while you can cut back on certain expenses like housing and leisure when circumstances require you to do so, there’s one expense you may not have a choice about: long-term care. And unfortunately, new data from the Society of Actuaries shows that Americans still aren’t preparing for it as they should be.

In a recent study of retirees 85 and older, most respondents who have not yet needed long-term care expect that if they do, they’ll get by with the help of paid home aides and family support. Most of those who are currently getting long-term care, however, have had no choice but to pack up and move to nursing homes or assisted living facilities, thus significantly adding to their costs.

The study also underscores the importance of having a financial backup plan for those who don’t have family to rely on to provide elder care. Currently, 32% of seniors 85 and over receive logistical support from family members with regard to physical activities such as transportation, meals, and household chores. To hire a home aide to provide those services, however, is an expense many seniors are in no position to bear.

If your goal is to maintain a level of financial security throughout retirement, then you’ll need to not only assume you’ll require long-term care at some point in time, but also save and plan for it. Otherwise, the latter end of your senior years might end up being more stressful than you ever could’ve bargained for.

There’s a good chance you’ll need long-term care…
It’s easy to think of long-term care as somebody else’s problem, but in reality, 70% of seniors 65 and over end up needing some type of long-term care in their lifetime. Among those, 69% end up requiring that care for a three-year period or longer.

And if you’re counting on Medicare to pick up the tab, you’re out of luck. The average Medicare-covered stay in a nursing home is a mere 22 days. That’s a meaningless tally in the grand scheme of a three-year period or more.

…and it’ll cost you
So how much might an extended stay at an assisted living facility or nursing home cost you? Probably more than you’d think. The average assisted living facility in the country costs $3,750 per month, or $45,000 per year, according to Genworth Financial’s 2017 Cost of Care Survey. The average nursing home, meanwhile, costs $235 per day, or $85,775 per year, for a semi-private room. Want your own room? It’ll set you back $267 per day, or $97,455 per year.

Even if you don’t require a nursing home or assisted living facility in your lifetime, there’s a good chance you’ll reach a point when you just plain need help functioning independently. And if you don’t have family around to assist, you’re going to have to pay for that help. Currently, the average cost of a non-medical home aide is $21 per hour. This means that if you wind up needing assistance for 10 hours a week, you’re looking at close to $11,000 per year.

All of this means one thing: You should be saving for these eventual costs during your working years rather than assuming you’ll cut corners to pay for them later on. And the sooner you do, the more secure you’ll be going into retirement.

The good news? If you still have a number of working years ahead of you, boosting your savings rate modestly could increase your nest egg substantially. For example, socking away an additional $250 a month on top of what you’re already saving for the next 20 years will give you an extra $123,000 in retirement, assuming your investments generate an average annual 7% return during that time. (That’s more than doable with a stock-heavy portfolio, by the way.) That’s enough to cover an assisted living facility for almost three years.

Another option? Look into long-term care insurance. The younger you are, the more likely you are to not only get approved for a policy, but also snag a health-based discount on your premiums. Having that insurance to defray the cost of long-term care could lift a major burden when you’re older and at your most vulnerable.

Finally, if you’re counting on family to provide any type of care or support when you’re older, have that conversation in advance rather than assume that help will be a given. You never know when your adult children might choose to pick up and relocate abroad or when a stay-at-home adult child of yours might opt to go back to work. Knowing what to expect assistance-wise will help you avoid a potential financial shock (not to mention an emotional one) down the line.

How to pay for long-term care? Several funding options exist

My Comments: If you don’t think about it, maybe it’ll go away. But for millions of us, living longer than our parents, LTC is an insidious risk that needs to be dealt with. There is probably no best answer, just a better one.

Short of dying early, most of us will need advanced care of some kind. And like shopping for groceries or going out to eat at a restaurant, it ain’t gonna happen without a money source.

The sooner you come to terms with this, the more likely your future years will be less stressful.

Oct 9, 2017 By Greg Iacurci

Roughly half of Americans turning 65 today will require long-term care. As life expectancy continues to rise and the cost of care creeps up, there’s a growing need for financial advisers to be knowledgeable about long-term-care funding mechanisms to help clients choose the best one — or combination.

Long-term-care coverage is delivered primarily through “private” means. Roughly 55% of expenditures from age 65 through death are via these private forms of payment, with 2.7% of that from insurance and the remainder from out-of-pocket expenses, according to the U.S. Department of Health and Human Services.

About 45% of long-term-care funding is from the “public” sector, mainly from Medicaid.

Public and private options have respective benefits and drawbacks concerning expense, level of long-term-care benefits and quality of care.


Traditional LTC
There are a few insurance options to hedge long-term-care risk: traditional long-term-care insurance, and life insurance policies and annuities with long-term-care features.

In 2017, the national median cost for a private room in a nursing home is roughly $8,100 per month, according to an annual report published by the insurer Genworth. An assisted living facility costs $3,750 a month.

Traditional LTC insurance is a stand-alone policy devoted specifically to providing benefits for long-term care if a need arises. This insurance delivers LTC benefits at the lowest cost and offer inflation protection, observers said.

Sales of these policies have dwindled over the past several years. While insurers sold 700,000 of these policies in 2000, the American Association for Long-Term Care Insurance estimates the industry will close out this year with 75,000 policy sales.

There’s been negative consumer sentiment in the marketplace as insurers have had to raise premiums in recent years on in-force policies due to initial policy mispricing, following a misjudgment in lapse rates and interest rates, said Jesse Slome, executive director of AALTCI. A number of insurers also have abandoned the marketplace.

Advisers typically use traditional LTC insurance if clients have a tolerance for a potential premium increase in the future and if they don’t have a life-insurance need, said Phil Jackson, insurance planner at ValMark Financial Group.

Life insurance – LTC combination
Sales have shifted more to combined life insurance-LTC products. These products drew $3.6 billion in new premiums in 2016, a 500% increase over the $600 million in 2007, according to Limra, an insurance industry group.

Broadly, advisers like the flexibility of these policies. Mr. Jackson explains it in terms of “live, quit or die”: Clients get a long-term-care benefit while living, but can also surrender the policy for a portion of their premium or provide heirs with a death benefit. The latter options aren’t available for traditional policies.

Further, premiums and benefits are guaranteed, he said.

Combo policies come in two flavors: hybrid LTC, and life insurance with LTC riders. Hybrids provide more of a long-term-care benefit and have a “very small, very modest” death benefit, whereas policies with LTC riders are more life-insurance focused, Mr. Jackson said.

One key difference is hybrids typically have an inflation-protection feature allowing a client’s future LTC benefit to grow annually, whereas the benefits are fixed in policies with riders, Mr. Jackson said.

Among LTC-related sales year-to-date at ValMark, 45.9% have been hybrid, 49.5% LTC riders and 4.6% traditional LTC.

Annuity products are the least-used among insurance products for providing LTC benefits. Combination annuity-LTC sales were $480 million last year, up from $285 million in 2011 but little-changed since 2014, according to Limra.

The products deliver a lifetime income stream, and increase that income in the event of a long-term-care need.

“Annuities are pretty much a last resort for long-term care,” said Jess Rorar, a planner at ValMark. Life insurance products provide more of a benefit and give more value for the money, she said.

However, in the event insurers decline a client from buying traditional LTC or combined life insurance-LTC, annuities can serve as a backup because the underwriting requirements are easier, said Jamie Hopkins, the Larry R. Pike Chair in Insurance and Investments at the American College of Financial Services.


“Almost every adviser you talk to has clients that end up on Medicaid. It’s just the reality of aging and living a long time,” Mr. Hopkins said.

The government assesses income and asset levels when determining individual qualifications for Medicaid. Generally, individuals have to essentially run out of money before Medicaid kicks in, Mr. Hopkins said.

Clients often need the help of an elder-care attorney to structure their assets appropriately — for example, there are several exceptions for assets, such as a home, that get protected from a Medicaid spend-down calculation, and an attorney can help protect those to the largest extent possible, Mr. Hopkins said.

Medicaid facilities, though, often aren’t as nice as those provided by private care; so private insurance would likely better protect one’s quality of life, he said.


Clients concerned about asset flexibility and freedom, as well as those with an aversion to medical underwriting, are often candidates for self-insuring if they have the appropriate wealth, Mr. Jackson said.

“Generally, even if you have the assets to self-fund, you’ll get a better return on your dollars if you use an insurance solution,” he said.

Clients also “tend to have to hold a lot of assets hostage to that self-insurance,” Mr. Hopkins said. “You’re not really allowed to touch them,” which sometimes leads to a reduction of lifestyle when young people set assets aside in a separate account for LTC purposes.