“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 used to think it was the most important reason to include Long Term Care Insurance in your financial plan. The pandemic has given me a more important reason. As I watched close family members of mine stuck in nursing homes and hospitals, alone, unable to have visitors during the pandemic, I became more convinced than ever that this is a necessity in your financial plan. Long Term Care insurance gives you something that everyone strives for in retirement…..CHOICE.
Before I get into solutions, let’s talk about numbers. 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 did scare me was watching people I love suffer alone. According to AARP’s website, approximately 186,000 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 some 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 vehicle that doesn’t give back to you or the family?
When I talk to people in retirement or approaching retirement, health care is always one of the top 3 concerns that they bring up. The good news is that there are new solutions that have been brought to market by the insurance industry. 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