According to a recent article from CNBC one of the great
dilemmas facing most retirees is paying for the costs of long-term care. As the
CNBC article, written by reporter Sarah O’Brien, points out, part of what makes
this such a troubling issue for today’s seniors is that no one can say for
certain who will have to pay for long-term care, or how much, or for how long.
Planning
ahead is the key.
You don’t have to be a victim of ill health, bad
planning, or economic setback, because with a well-crafted plan you and your
loved ones should be able to navigate the road to retirement with your dignity
and your well-earned resources.
The Burden of Paying for Long-Term Care Will Affect the Majority
of Retirees
“There’s an expense lurking down the road for many retirees
that is largely unpredictable but likely: long-term care,” says the
CNBC article. “Someone turning 65 today faces a nearly 70 percent chance of needing
LTC services during their remaining years.” But as premiums on long-term care
insurance policies continue to rise, financial advisors are looking at other
strategies to help their clients prepare for a day when they can no longer live
independently. As one planner told CNBC, “We’re a country that excels at
prolonging and extending life. The result is that the costs of care later in
life, and the duration of the care, are lasting longer and longer.”
On average, once they start needing long-term care, women
tend to need these services longer than men – 3.7 years for mom compared with
just over 2 years for dad. But no matter how long the bills keep coming, the
monthly costs can be “eye-popping,” according to CNBC. The nationwide median
cost for care at an assisted-living facility is $4,000 per month, compared with
$4,200 for a home health aide. If a senior needs care in a skilled nursing facility,
the median cost for a shared room nationwide is $7,400 per month, or nearly
$90,000 per year. Here in the Pacific Northwest, those costs are usually much
higher, depending on the quality of the facility. That’s why one planner, in a
remarkable example of understatement, told CNBC’s O’Brien, “Without planning,
long-term-care costs can be a big financial hit.”
The Burden of Paying for Long-Term Care Can Occur at
Varying Stages of Life
According to statistics from the American Association for Long-Term Care Insurance, fewer than 5 percent of LTC claims are initiated
at age 70 or younger. About one-quarter of all claims begin when a senior is in
their 70s, and by the time we enter our 80s the likelihood really climbs.
Another one-quarter of all claims for long-term care start when a policyholder
is between 81 and 85, and an even higher number when the individual is 86 or
older – the age when about 45 percent of LTC claims are initiated. To financial
advisers, that means their clients face an uncertain and unpredictable timeline
for long-term care. Advisers are faced with the challenge of gauging “the
probability of a particular client needing care eventually — genetics and
lifestyle can factor in — and evaluating available resources to recommend an
option,” says CNBC.
For most retirees, the choice comes down to two broad-brush
alternatives: either they purchase some form of insurance, or else they
self-insure, planning to rely on their own assets to fund long-term care costs.
“Other options,” says CNBC, “include leaning on family members or spending down
(or shielding) assets to qualify for Medicaid-sponsored nursing-home.” Advisers quoted in the article suggest that
people in their 60s today who have roughly $3 million to $5 million in liquid
assets are the best candidates to self-insure since income from those assets
should cover LTC costs when and if required. As for buying coverage, the
solution that CNBC calls “the most straightforward” – a traditional long-term
care insurance policy – is too pricey for many middle-income retirees,
“contributing to a 60 percent drop in sales since 2012.” As the article adds, “With claims exceeding
expectations, many [LTC] insurers also have fled the space” and stopped selling
policies altogether.
A Hybrid Life Insurance and LTC Policy May Be Right for
You
Another option some advisors recommend is a relatively new
hybrid policy that combines life insurance with LTC coverage. “While the
particulars of each policy vary,” says the CNBC report, “the idea is that you
can tap the death benefit during your lifetime if you need it to pay for
long-term care,” although “doing so reduces the amount that your heirs would
inherit.” The chief drawback, however,
is up-front cost. “You typically need a pot of money to fund it. Some insurers
ask for an upfront lump sum, while others allow you to spread the premium
payments over a set number of years.”
Even though some advisers quoted by CNBC expressed skepticism about the
sustainability of the so-called hybrid model, these policies do seem to be
gaining in popularity with consumers, with sales up 5 percent in 2018 compared
with 2017.
For Today and Tomorrow, Planning is the Essential
Here at Tacoma Elder Care we partner with some great folks
in the Puget Sound area who can help you navigate some of these financial
concerns. Such as Banker’s Life in University Place, WA. We encourage you to
begin the planning process by attending one of our FREE workshops, where you’ll
learn about the documents you’ll need to have in place as the corner stone of
your Plan. After that we can help you navigate what else you will need,
depending on your personal situation and resources.
Remember, having no plan, is a plan – a bad one!
For more information on Long-term Care, contact Bob Michaels of Smith Alling in Tacoma, WA, today
for a FREE consultation, or attend one of Tacoma Elder Care’s FREE Workshops
where you can learn more about how to get Your Plan under way!