Here at AgingOptions we always advise our readers and radio listeners not to get all their information about any product from a person who makes his or her living selling it. It’s always essential to get balanced advice. But it’s also true that sometimes people inside an industry know it best, so with that in mind we offer this recent article from the Kiplinger financial website that explains some basics about long-term care insurance. The purpose of the article, written New Jersey insurance agent Dennis Ho, isn’t necessarily to convince you to buy, but instead to provide some of the reasons why LTC insurance might make sense.
Why Buy LTC Insurance: As You Evaluate, Consider More than Money
Many of the pro and con articles about long-term care insurance emphasize the financial aspects of the decision, but Dennis Ho suggests a more strategic view. “Before you dig into costs, benefits and contingency plans, step back and look at the big picture,” he advises. “This decision is bigger than budgets and life-expectancy tables. It’s about your family and your wishes for them as well as yourself.” We agree. Long-term care insurance is simply a means to an end, right for some but less advantageous for others.
Ho provides a good basic definition of his product. “In simple terms, long-term care insurance is about paying for assisted living or nursing home care as you age or in the event of a chronic condition or disability,” he writes. But as you decide whether to make an LTC purchase, think beyond cost versus benefit. “Crunching the numbers is important, but deciding you need long-term care insurance — or you don’t — is rarely just a calculation of risk vs. costs. To make the right decision, it’s important to also weigh factors beyond dollars and cents.”
Writing in Kiplinger, Ho lists three reasons why, in his experience, people decide that long-term care insurance is right for them. Without going into detail, let’s take a look and see if these reasons resonate.
Why Buy LTC Insurance: Avoid Becoming a Burden to Those You Love
The first reason Dennis Ho cites seems to us the most basic. “The reality is 70 percent of us will need some type of long-term care after age 65,” he states. This could include in-home assistance, assisted living, or skilled nursing home care. While one person in five needs care for five years or longer, the industry reports, the average is far less: women need long-term care for an average of 3.7 years, compared with men who average 2.2 years.
“Most of us want to stay in our homes as we age,” Ho says. “But doing so can put a strain on our caregivers. Today, 80 percent of care in the home is provided by unpaid caregivers, usually family members, who spend an average of 20 hours per week providing care.” It’s widely known that the burden of care calls heavily on women who make up two-thirds of all caregivers and who often have to balance caregiving and childcare with a regular job. Caregivers are estimated to lose out on more than $300,000 in wages and benefits over their lifetime because of the toll that caregiving takes on their work life. Long-term care insurance is one way – but not the only way – to spare your loved ones that financial pain.
Why Buy LTC Insurance: Protect Your Hard-Earned Assets
People who think they can cover long-term care costs out of their retirement savings may be in for a rude awakening, the Kiplinger article suggests. “When you do need long-term care, it can be expensive. The costs vary significantly across the country, but the median annual cost for assisted living care is $48,612. The cost of nursing home care is more than double that, with the nationwide median at $102,200 per year. The median annual cost for home health aides is in the middle at $52,624.” That level of spending can quickly deplete retirement savings.
Depending on your circumstances, there may be other options to cover the costs of long-term care, most notably VA benefits for qualified veterans and the federal government’s Medicaid program. (Medicare does not cover permanent ongoing care, but it will cover a short stay in a skilled nursing facility – up to 100 days – for rehabilitation after an injury, illness, or hospital stay.) But both Medicaid and the Veterans Administration benefits are “means-tested,” which generally means you have to have relatively little assets to qualify. This often leaves LTC insurance as the most viable option to help meet costs of care and avoid decimating your nest egg.
Why Buy LTC Insurance: Make Sure You Have Choices Concerning Your Future Care
“Even though it’s not something we like to think about, most of us have a clear idea of the type of care we’d like as we grow older,” Dennis Ho writes. “Planning for long-term care starts with making your preferences known and creating a financial plan to achieve them.” For some, that plan includes long-term care insurance, which helps policy-holders pay for the level of care they want and supplement their savings with proceeds from their LTC policy.
LTC policies are generally pricey, and premiums can rise over time, so deciding how much you can realistically afford to spend on premiums is essential. Moreover, you’ll want to think ahead, as Rajiv often reminds us, and ask yourself if you could afford an even higher premium ten or twenty years from now. “The first priority is saving for your retirement,” Dennis Ho advises. “If you’re age 65 and you have less than $250,000 to $300,000 saved for retirement, focus on building your savings before adding long-term care insurance premiums to your budget.”
We agree that the decision to purchase long-term care insurance is highly personal, and it’s based on a host of financial and emotional factors. We suggest that, before deciding one way or the other about an LTC policy, you sit down with an objective financial planner and work through all the issues as part of a wide-ranging plan. Having a financial dashboard in place will help you make this important decision more strategically. Contact us at AgingOptions and we’ll suggest financial planners who will assist you with this important task.
Two Important Retirement-Planning Announcements from AgingOptions
At AgingOptions our chief desire is to help you prepare for the kind of retirement you’ve always dreamed of having. Toward that end, we want to share two important announcements that are designed to facilitate your LifePlanning process even during this period when most of us are required to avoid gathering in groups.
First, Rajiv Nagaich has scheduled several of his popular, free LifePlanning Seminars in the form of webinars that you can watch conveniently at home. Simply visit our Events Page and register for the webinar of your choice.
Our second announcement: in cooperation with our partners at LifePoint Law, we are excited to launch a ground-breaking new service called the LifePoint Law Emergency Legal Kit. Without leaving your home, you can now consult with a LifePoint Law attorney who will work with you to prepare and sign a complete set of vitally important legal documents including both Financial and Healthcare Powers of Attorney, a Living Will/Advance Directive, a Will or Trust, and much more. Click on the link or call us at AgingOptions and we’ll explain this excellent service to you.
Reliable information has never been more important – and that’s our promise to you at AgingOptions and LifePoint Law. Age on!
(originally reported at www.kiplinger.com)