“If you’re not allocating some of your dollars to long term care, you’re allocating all of them.” That quote has stuck with me since the first time I heard it and I always felt it was the most important reason to include Long Term Care Insurance in your financial plan. Thanksgiving is around the corner, and while discussing long term care isn’t a sexy conversation on a holiday, it’s typically a holiday where the majority of your family is all in the same place at once. The reality is that we have an aging population. According to a recent study, the majority of American people would prefer to stay in their home due to a long term care event, particularly after seeing the inaccessibility of senior facilities to family during the pandemic. Unfortunately, we have two major problems. First, most Americans have not properly planned to pay for a potential LTC event. Second, we are looking at a major shortage of home health care workers.
By planning appropriately, you should be able to afford a home health aide. Having the backing of an insurance policy will hold much more weight than someone simply pledging their bank or investment accounts. If an agency has a decision to make on two households, they are always going to choose the safest financially. By not planning, you run the risk of forcing a loved one to provide unpaid care. According to a 2020 study by AARP, 64% of all caregivers are unpaid help. Translation, it’s a family member. A family member who may have to quit a job or reduce hours in order to fulfill those duties. A family member who will suffer emotionally having to take on that responsibility. A family member who may end up putting themselves in their own compromised financial position to fulfill that care role.
According to LTC.gov almost 70% of people aged 65 and older will need some form of long-term care in their lifetime. The average length of a long term care event is 3 years (3.7 for women, 2.2 for men)*. But Medicare will pick that cost up right? Sure, for the first 20 days. After that you have a daily co-pay until day 100 and then you are on your own. Depending on where you live, being on your own for that bill can be incredibly expensive. Look at this graphic from Genworth showing the average cost of various types of care in the New York area in 2021.
These numbers are not meant to scare you, they are meant to encourage you to plan for the possibility. What is scary is watching a person you love suffer alone. According to the CDC website, over 200,000 residents and caregivers died in nursing homes and other long term care facilities from exposure to Covid. Would those numbers have been different if people could have stayed in their own home with an In-Home Health Aid? I don’t know but I would think so. That’s why I am so adamant about doing your best to include some form of LTC in your financial plan.
Older, traditional LTC policies had major flaws. First, the majority of premiums weren’t guaranteed. Many of us are living on some type of fixed budget in retirement. Unfortunately, a notice of premium increases of 10% or even 20% are not uncommon and force retirees into difficult choices. Second, traditional policies reminded me of car insurance. Many policies seemed to be based around the “use it or lose it” model. While most of us will need care, if we don’t, why should you pay those premiums into a product that doesn’t give back to you or the family? There are great life insurance products now on the market that guarantee your premiums. They also will either pay out in the form of long term care expenses, a death benefit or a combination of both.
When discussing retirement with my clients, health care and potential LTC events are always one of the top concerns for people. When it comes to health care they want one thing….choice. They want to be able to make their own decisions and not be forced by someone into a situation they aren’t comfortable with. Adding long term care insurance into your financial plan will provide just that…choice. You can choose how and where you get to spend your life, and you will be able to do so without significantly affecting the lives of your loved ones. As I mentioned above there are real solutions for this concern. Solutions that can guarantee your premiums, as well as guarantee that either you or your beneficiaries will benefit from the policy you put in place. Solutions that will allow you to stay in your home should you choose and have care come to you. By beginning the conversation on long term care planning, it will help you understand what programs are available and fit your specific plan. More importantly, by putting a plan in place it will give you a CHOICE if you were to need help due to an LTC event.
Feel free to share this with anyone you know affected by these types of life events.
1.From the U.S. Department of Health and Human Services