Should I purchase long-term care insurance, or invest the money to pay for my long-term care?
I'm 53 years old and I'm thinking of purchasing long-term care insurance but I'm not sure I'll use it. Should I invest the money instead to pay for my long-term care? How much should I invest? What are pros and cons?
You’re in the perfect time to select your options for long-term care planning. Here’s the simple fact: 3 out of 4 people age 65+ will need long-term care. However, two groups of people may not need to buy a private LTC policy. Those who have a net worth under $250k or above $2 million. The first group who’s under $250k of net worth can quickly spend down their possessions to qualify for Medicaid. The last group who have $2 million can afford to self-insure. Thus, it’s the people whose net worth between the $250k and $2 million need to plan for that contingency.
Another factor to consider is if you have any intention to leave a legacy to your children. With that goal, having a LTC insurance that’s partnered with your state can protect a portion of your asset to leave behind.
Lastly, given three options to choose from for the long-term care planning, you’re no longer limited to the only choice, a stand-along LTC policy. It’s cheaper comparing to other two options, but the pitfall of “use-it-or-lose-it” has deterred many potential buyers. The other two hybrid policies which link the LTC with life insurance or annuity may not lose your premium dollars, but require a hefty upfront funding, either one time or a five-, ten, or twenty-year periods.
My suggestion is to consult with a CFP® who handles LTC planning. In my practice, I can get quotes from top-notch companies based on the criteria my clients set. Experience in LTC and a wide selection are the keys to find the right LTC for you. Best!
Most studies I've seen suggest that someone who is 65 years old today can expect to spend up to $250k on health care in retirement. That number will grow at a rate of approximately 7% in years to come. Traditional long-term care policies are pretty expensive, if you can find a good one at all. Today, most long-term care insurance is offered as a rider on an annuity or life insurance contract. I like this better because if I don't need to access the funds for long term care, then the money will pass to a beneficiary. The insurance companies also offer an enhanced benefit for long term care meaning that if I put $250,000 into a life or annuity policy, I will have a $500,000 long-term care benefit for example. Depending on how much long-term care insurance you may need will determine which vehicle is best for you.
Depending on how much money you have to invest will determine if an investment option is possible. There are some people out there that can self-insure against long-term care costs, but you would need to have a liquid net worth between $2 - 5 million.
Here is something for you to think about:
I have had four elders in my family die in the last five years – my father, mother, aunt, and uncle. Each one had a long demise, and suffered physically, mentally and emotionally. Each one needed assistance with the activities of daily living for a prolonged period of time.
Fortunately, each had the money to pay for a home health aide of the highest caliber. These people did everything from change diapers, to fix meals, to bathe and dress. There was no way I or my sister was going to do any of that, as much as we loved our elders. We simply don't have the inclination, and frankly, we don't have the skill set necessary to really nurture and comfort and care for people at that level of distress and disability.
If you are going to need help with personal care when you are older, you should be prepared to spend top dollar for the best help available. You deserve that much. Don't kid yourself into thinking family members are going to want to do it, and leave their jobs to do so, etc.
If you don't anticipate having the cash, then buy the insurance. It's as simple as that.
This is always a tricky one as there is no definitive "right" answer. I generally think purchasing long term care insurance is a good thing as long as you can afford it. Few things to note. First, make sure you acquire with a creditable company. There aren't that many players in the long term care business so go with quality vs price. They can raise the price over the years on these insurances so you want a well established company. Second, make sure you get enough coverage that it is worth purchasing. Don't get a small amount as you want this insurance to actually have an impact years down the line. Third, you are in the prime years of purchasing this insurance. Don't wait too long as the prices start to escalate very quickly. Fourth, if you are married that is a big pro in the long term care insurance world. You'll get a roughly 50% discount if the both of you apply. Fifth, Get an escalation or inflation rider for sure! I'm a big fan of these as you'll want the coverage to increase over time. Finally, it is important to note approximately 50% of people need this care and women are much more likely than men to utilize it (hence costs for females is substantially higher than males). Hope this helps!
LTCi isnt a product you just purchase off the store shelf, step one is to find out if you even qualify? Like life insurance you do not buy it with your money, you purchase it with your health. There is no for sure way to know until you submit your evidence of insurabity to an insurance carrier.
We have many questions for you:
- How is your health?
- Married? if so is your spouse healthy? would they apply for ltci too?
- Children?, if so how many? live close to you?, would they help you with your care if you needed it?
- what is your occupation?
- what medication do you take?
- How much money is it that you want to invest?
- what is your risk tolerance?
- Do you have any qualified money? (IRA, 401k, 403b etc)
- Do you have your estate planning done? Will, Trust, POA etc?
- Are your parents living, if so whats there health?
- *******there are about 30- or so more questions i can think of, but im out of time.
You see the answer for you is just not that easy, nor is it that easy for anyone. Planning takes time! If you dont have time to do it right, when will you have time to do it over?
We can help and are happy to, we are a webinar away! Just call.
Brett M. Sause,LUTCF®, LTCP®, CLTC®, RFC®, LACP®, FSCP®
Principal & CEO
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