I was fortunate enough to be invited to do my first podcast last week with NJ Life and Health, a company who focuses on Medicare planning. Due to their market, we spent a lot of time discussing Long Term Care and Annuity planning. It reminded me of the phrase that resonates with me the most when it comes to LTC, “If you’re not allocating some of your dollars to long term care, you’re allocating all of them.” That is the reality when it comes to experiencing a medical event that requires long term care. For those who have had to witness loved ones experience this, you have seen the damage that it can cause, both financially and emotionally. The plan should never be to go on Medicaid. The plan in retirement should be choice. Where I choose to vacation, who I choose to….and to stay in my house to receive care if the need arises.
The link to the podcast is below but I wanted to hit on a few key points:
- Long Term Care has made positive changes over the past decade. No longer is LTC a “use it or lose it” type of insurance. As life insurance companies have entered the LTC space, it ensures that the benefit will either be paid to in order to pay for care or passed along to your beneficiaries as a life insurance benefit.
- The definition of what LTC benefits can be used for has expanded greatly. Depending on your coverage, the benefits can be used for Nursing Home Care, Alzheimer’s Facilities, Skilled Nursing Care, Adult Day Care and, most importantly, in-home health care even by a family member. It may also cover improvements that need to be made to the house to improve accessibility.
- The cost of Long Term Care has also improved. One of the biggest issues that older policyholders come across is a premium that’s not guaranteed. As your premium increases, most people have to make the decision to cut their benefit in order to keep the premium at an affordable rate. Now, with life insurance as the chassis, your premiums are contractually guaranteed and cannot be increased. Additionally, you can structure the policy to be paid off during your working years if you so choose.
According to the latest LTC study by Genworth, 7 out of 10 people over the age of 65 will require care at some point in their later years. 66% of careGIVERS end up funding that care. The average Long Term Care length of stay is 3.2 years. I’ve pasted the cost below in the chart:
As you can see, the cost of an event like this can quickly eat into your assets. If you think Medicare is taking care of that cost, I have bad news for you. You are covered for the first 20 days in a skilled nursing facility, from days 21-100 you are responsible for the cost up to $204, after day 100 you are on your own.
The bottom line is LTC coverage isn’t the right choice for everyone. The mistake would be to not at least have the conversation. Understand what your risks and exposures are, then make an informed decision that works for your financial plan.
Please pass this along to anyone you think may benefit.
Rob