Why You Should Consider Long Term Care Insurance in Your Retirement Planning

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.

genworth-nursing-cost-2016The 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.

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.* States can differ on spend-down.





Everyone should do some estate planning.

Everyone—regardless of how small their wealth—should do at least some estate planning. 

Some things to consider include:

• A will: This is the most basic of estate-planning documents, yet a Caring.com survey this year showed that more than half of Americans don’t have a will. That’s surprising and troubling all at the same time. A will can provide certainty and clarity and eliminate  the grey areas when property is moving from one generation to the next. Don’t just assume everything will end up with the people you want it to if you fail to leave specific instructions.

• A trust: Not everyone needs a trust, but it often makes sense. Basically, a trust allows you to control your assets from the grave. You can set certain restrictions, which is especially helpful if your kids are young or they don’t really manage money well. That way you may be able to keep them from blowing their inheritance all at once. For example, a restriction might be that they don’t receive the money until they earn a college degree.

• Power of attorney: It’s important to assign someone power of attorney so that if you become incapacitated that person can speak on your behalf and sign important documents. You can also have a living will to outline your wishes, which could help your family make tough decisions about your healthcare.

If you don’t plan for your long term care who will?

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Sources of Help for Seniors

There are many government-supported benefits for seniors, including some programs that are not widely known. Seniors and their caregivers can find services through some helpful online resources listed below.

The National Association for Home Care & Hospice has a Home Care and Hospice Agency Locator and a Caring Store with workbooks and manuals for caregivers.

The Visiting Nurse Associations of America has a Find-a-Provider website.

The Eldercare.net website contains a searchable database of resources that are available at the state and community level. For example, there are connections for legal services, elder abuse prevention, health insurance assistance, home health care, and long term care. Users can enter their data to search for specific programs to meet their individual needs.

The National Council on Aging provides a website called BenefitsCheckUp.org on programs for the elderly, which it says can help some seniors save thousands of dollars on the basic costs of living.

The Older Americans Act of 1965 (OAA) established a national network of federal, state, and local agencies that help older adults live independently, called the National Aging Network. Anyone 60 or older is eligible for services under the OAA; those most in need get priority. The network includes 56 State Agencies on Aging, 622 Area Agencies on Aging, and more than 260 Title VI Native American aging programs. Its programs are supported by tens of thousands of service providers and volunteers. A few examples of the many programs in the network are:

EyeCare America provides access to free medical eye care and annual eye exams;

Program of All-inclusive Care for the Elderly (PACE), which provides stay-at-home alternatives to living in a nursing home;

Chronic Disease Self-Management Program (CDSMP), which gives workshops that help people manage health conditions such as arthritis, asthma, emphysema, bronchitis, cancer, depression, anxiety, diabetes, heart disease, high blood pressure, stroke, osteoporosis, and HIV/AIDS.

For information on Long Term Care Insurance, see the Guide To Long Term Care

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The Cost of Long Term Care Insurance versus The Cost of Not Insuring

The cost of long term care insurance policies may seem high to some people, but it may actually be a less expensive in the long run than not insuring.

Not insuring and depending on family caregiving has hidden costs:

Lost income. Family members sometimes must leave their jobs to care for aging parents. The consequences are lost salary, lost Social Security benefits, and difficulty getting back into the job market after the absence. Also, leaving a job can mean loss of health insurance.

Increased Health Risks. Caregiving is stressful physically and psychologically and may result in injury or illness to the caregiver. Because of the demands of caregiving, including financial demands, family caregivers may be less able to take care of themselves and their own health.
genworth nursing cost 2016
Lost Retirement Assets and Less Investment in the Family. In a study by the National Alliance for Caregiving and Evercare, 47% of working caregivers reported using up all or most of their savings while giving care. These costs can mean less money available for such expenses as retirement and the education of children.

The U.S. Department of Health and Human Services says nearly 70 percent of those 65 or older will need long term care at some point. Since nursing home costs can be $80,000 a year or more, having long term care insurance is an essential part of financial planning. Long Term Care Insurance can pay the expenses of both family care in the home, and institutional care.


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Turkey, stuffing and a side of long-term care

Happy Thanksgiving
Have Piece of Mind With the Piece of Turkey

One of the ways that I recommend people discuss “sensitive” issues like long-term care is to use stories about others who have experienced financial and emotional woes due to their lack of planning with products like LTC. I brought this up recently while presenting to a group of retirees and a man made the point to me that he agreed with this approach. He further stated that while sitting down to have dinner with his adult son and wife, he brought up the story of a neighbor who hadn’t prepared for LTC and was now in a nursing home.

The man made the point to his son and wife that this was causing all of the assets that he had saved for retirement, and had hoped to pass on to his children, to be slowly but surely depleted. The man said that he didn’t want that to happen to his son and daughter-in-law, and especially to his beloved granddaughter. So he made his son commit to speak with his insurance agent about long-term care.




Boomers Look for Peace of Mind But Most Won’t Have It

The last of the Baby Boomers celebrate their 50th birthday this year and may spend one third of their lifetime in retirement. The dream of life after work is becoming a nightmare reality.

Boomers are not taking the steps necessary to assure they achieve the one thing most are looking for in retirement: peace of mind. Financially they are in a mid-life crisis. “Will I have enough income when I retire?” Peace of mind will elude most boomers, not for lack of desire, but for lack of planning.

When we are in our 30s and even 40s we usually do not have much experience with the world of care needing and care giving. It seems in the last 5 years incidences of long term care are showing up more in the Boomers life. Relatives, friends, even spouses may be the next one being diagnosed with a condition, many that will require care later (Parkinsons, Alzheimer’s, etc). Unfortunately just the diagnosis is enough to disqualify them from purchasing care insurance.

When the care is needed it is usually first paid for with income. Then if more money is needed to pay for care the next to go are savings and investments.

Without long term care planning most Boomers will find their nest egg empty having spent it on long term care. Many who could buy insurance delay the purchase only to find out later that they can no longer afford the premium because the cost is higher the older you are when you buy a policy.

One way many could have protected their nest egg was by using the interest on their investment to pay the insurance premium. $100,000 x 5% = $5000 – taxes ($5000-$750=$4250). The average LTC premium for a couple is $3600. Spending $3600 a year to save the $100,000. Kiplinger Financial predicts the cost of care to be $250,000 a year in 17 years and as much as $600,00 total spent on care. (link).

But what tends to happen more often is health changes, now uninsurable and without peace of mind.