If you haven’t already done so, now is an excellent time to consider adding long term care insurance to your retirement portfolio. Because uninsured long term care expenses can pose a significant risk to the assets you’ve worked a lifetime to accumulate, long term care insurance should be considered as part of a complete financial plan.
As former Senator told the United States Senate Special Committee on Aging, “Although the need for health insurance to cover a patient’s medical expenses in case of catastrophic illness is widely recognized, few people are insured against the costs of providing long term support services for that same person. This lack of insurance coverage jeopardizes the financial security of families and diminishes the economic security of the country.”
The likelihood that you may need long term care is significant. Some 70% of Americans who reach the age of 70 can expect to utilize some type of long-term care during the remainder of their lives. And while long term care includes a broad range of services, from in-home care to nursing home care, each comes at a cost. Those costs could be substantial, and could have a significant adverse effect on your retirement portfolio.
Why? Most forms of health insurance focus on medical expenses, not the custodial care and nonmedical expenses associated with long term care. Medicare only covers nursing home care after a related three-day inpatient hospital stay and even then for only 20 days before a daily co-payment is assessed and Medicare only covers a total of 100 days.
Medicaid doesn’t kick in until one has spent down a significant portion of their assets (spend-down to $2,000*). Therefore, if either you or your spouse needs long term care, you may have to pay for that care out of your accumulated assets … unless you have long term care insurance.
The average cost of a private room in a nursing home met or exceeded $80,000 annually. If one partner needs such care, the cost could quickly and substantially erode the assets acquired over a lifetime.
Let’s use a hypothetical couple living off the interest of $500,000 of invested assets to illustrate how serious an impact long term care expenses could have.
For the sake of this discussion, assume the couples’ investments are earning approximately eight percent annually, generating about $40,000 per year in income. Let’s also presume this couple needs all of this income to support them while they’re living together in their home.
Based on an $80,000 annual cost for nursing home care, it may appear that this couple has enough for a little more than six years of care. However, that basic calculation does not consider the living expenses of the spouse who remains in the community.
If this couple is using all of their investment income to provide for their living expenses, they will soon need to start withdrawing from the principle for a portion of those living expenses as well as for the long term care expenses of the partner who needs care.
In circumstances like these, it’s easy to see how the assets accumulated over a lifetime could soon be completely exhausted.
Long term care insurance can help provide the funds to pay for the care you may need, while simultaneously protecting the assets you’ve worked a lifetime to accumulate. Long term care insurance may also help preserve financial independence, choice, and dignity, and those can be priceless.
It’s never too early to consider insurance because your health can change at any time, meaning you may be uninsurable and end up paying out-of-pocket.
The Partnership Asset Protection program is available in most states. This will protect your home and assets to the limit as was paid by a qualified policy.
Some people have too many assets to benefit from the Partnership. They may prefer an annuity or life insurance with a long term care rider. You can use an existing whole/universal life policy or existing annuity to fund a new policy with long term care coverage. The Pension Protection Act allows this transfer without having to pay capital gains.
Feel free to contact us for more information or for an updated quote.
.* States can differ on spend-down.