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August 31, 2011

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The primary reason why I have tried to amass as much wealth as possible is that I feel that the more money we have, the more security we have to deal with whatever unfortunate things might come along. Like most people we have Homeowner's Insurance, Car Insurance, and an Umbrella Insurance policy. We do not however have LTC insurance and in the worst case scenario would use our wealth to deal with health related issues that arise during the final stages of our lives. Currently I am almost 77 and my wife is 78 and we manage particularly well taking care of ourselves. My wife recently gave up driving but this is not a problem for us. I decided to keep both cars since it's very convenient if one is out of action for a while. In the worst case scenario if neither of us could drive, our county has a program called "Outreach" where seniors can request to be picked up by car and taken from A to B locally for $5.

Our city Senior Center provides a wide range of facilities such as two swimming pools, a fitness room, free lunches, trips, various forms of entertainment, and also maintains a list of caregivers that can be hired to come to a home for as many hours as required to take care of people that have a health problem but do not need to be institutionalized. There are also many Assisted Living Centers with a range of plans to accomodate most situations, these are expensive but very popular.

The bottom line for us is - Give a lot of thought to the location where you plan to spend your retirement years. Rather than make your choice based primarily upon your aesthetic preferences in your mid life, when you are fit and healthy make it based upon more practical considerations that will make life easier, more comfortable, and more manageable during your 80's and 90's if you develop health and/or mobility issues.

I figure if you can't afford to self pay and you can afford LTC insurance then you should buy LTC insurance. If you can afford to self pay or can't afford the LTC insurance then you should not buy LTC insurance.

You can afford to self insure if you've got a few million in the bank like Old Limey. You can't afford LTC insurance if you are on a fixed budget and just can't come up with the $2-3k per year it costs. LTC insurance isn't cheap and thats a significant burden for a lot of people.

The longest-lived peoples of the world live well beyond age 90 and die w/o disease...and no government health care. It's worth looking at their lifestyles.

I am quite shocked at the statistic mentioned that 40% of people under the age of 65 require some type of long-term care. Obviously this includes people w/any type of lifelong disability, like a child who has cerebral palsy, for instance;

I wonder if 41 is too young to look into group LTCI? I would like to know about the partnership (mentioned in the post) between certain states and private insurers, with the 'asset disregard' feature.

@Holly,

Don't believe everything you read especially from people who are in the business of selling insurance. These are the scare tactics they use to convince people they need things.

The 40% number is a blatant misleading lie. Lets think about this for a minute. The statement says 40% of people under 65 currently require some form of long term care. They didn't say care or short term care they said long term care. Long term care needs to last .... a long time. Since this is people currently under 65 that includes everyone, 5 year olds, 15 year olds, 25 year olds and yes 64 year olds.

I imagine you know quite a few people under age 65. Probably many 100's of them. Do you know even a few of them who are getting long term care, let alone 40 for every 100 people you know? These statistics are pure bunk.

I am sure there is some methodology underneath them. Maybe they are counting everyone who ever had an injury and went to physical therapy and needed someone to open the car door for them for a few weeks or something. Even then I can't see how they could get anywhere near 40%.

Here is a telling statistic from the following website (I can't verify if its true but its not from an insurance company so it has less reason to lie):

http://www.payingforseniorcare.com/longtermcare/statistics.html

Percentage of total long term care hours that are provided by unpaid caregivers: 84%

So when they say people getting long term care they are also counting family members who help out someone who needs a little assistance. Old Limey's wife quit driving. Does he drive her some places? Does that count as unpaid long term care? Who knows what kind of non-sense these numbers have behind them.

I am not against long term care insurance per se. I am also not against insurance companies. I have lots of insurance and have no general complaints with the companies behind them. But I also know how sales works and where the incentive is to lead people down a path they want you to go based on pseudo truth that is very misleading. Each person should decide for themselves based on facts . Just don't believe a thing the insurance company tells you. I assure you this 40% number for people under 65 is bogus and if you saw how they got to it you would feel very lied to.

We have recently researched this and made the decision to buy some LTC insurance. A couple of points worth noting.

First, don't wait until you are too old or have health problems or you won't be accepted for LTC insurance. You probably want to do it before age 60 and early to mid 50s might be better.

Second, don't overbuy. The guideline I read is that LTC currently runs about $80K per year. However, you presumably could fund part of that from your retirement income. So figure how much your retirement income will be (pensions, Social Security, draw from your retirement investments) and subtract that from $80K to figure your "gap". This gap is the amount you need to insure. If you don't have a gap, then you don't need LTC insurance unless you are concerned about leaving wealth for your children.

Lastly, make sure you buy a policy with good inflation protection, so that it covers the growth in the gap as costs inflate.

I'm definitely planning to buy LTC insurance, but not until I'm closer to age 60.

My grandparents have both been recently put into a convalescent home. My grandfather has dementia and alzheimers. He's an atomic war veteran. And to pay for their stay they had to sell their house and everything they owned.. The government wont take care of their veterans and elderly. So, it is good to think ahead for LTC.

I counsel clients daily on this issue (and no, I don't sell LTCI). If you are buying LTC insurance, you need to be honest about exactly why you are purchasing it. It generally falls into one of three categories:

1. It opens up options to you that are unavailable to you under Medicare/Medicaid. For example, traditional Medicaid only pays for LTC in a nursing home. Not assisted living or home. There are other State specific medicaid programs that pay for that type of care in some states. However, these do sometimes have waiting lists and are non-existent in some states. So, if you want to have the option of living in an assisted living facility versus being forced into a nursing home and can't afford to privately pay, you should consider LTCI. Also, I'm not confident Medicaid will be there to catch people who don't have sufficient assets in the future, anyway.
2. If you have a spouse, it protects additional assets for your spouse rather than potentially impoverishing them. Why make your spouse spend all of your assets (with a few exceptions) down to $50,000 or whatever the applicable limit is in your state.
3. You want to protect assets for your children. I'm somewhat amazed at people who believe they MUST leave assets to their children. When did this become a requirement? Many, many people who consider LTCI are considering it so that they can leave assets to their children. That's fine, but when they decide if they can afford the $4,000 per year premium out of their limited income, they need to recognize exactly why they are doing this. Maybe those children should pitch in some money to protect this inheritance.

There are some really good reasons to consider LTCI. I recommend to every client that I meet with about this topic that they get a quote for LTCI. They need to find out if they'd even qualify and what the premium would be before they can make an actual decision about whether they want it. Some clients decide they want to purchase it and others don't.

There are also lots of hybrid policies. Some that are also life insurance. Some that are a combined policy for spouses.

Jim:
I think that for self insuring (which is the path I have chosen), by the time you estimate you may need LTC you don't want money in the bank, you want money invested in a combination of bonds and CDs that are taxable (in IRAs) and tax exempt (in Trust accounts) that will be laddered to bring in a steady flow of income in addition to other sources, which in our case are pensions and social security. We are also still reinvesting our investment income, currently averaging 4.95%/annum, as soon as it arrives so the total will continue to grow until it is needed.

Our hope is to remain in our own home as long as possible but none of us know how our future will pan out.

One of my daughters volunteered a few hours every week for many months to watch over a lady while her husband did some shopping. The lady had advanced Alzheimers and was under hospice care at home. She couldn't communicate, feed herself, drink, or watch TV and was totally bedridden with a zero quality of life but her condition was quite stable. There's no acceptable solution for this situation other than waiting until a merciful end finally comes. The most recent info my daughter received was that the lady was still hanging on.

As one who is not eligible for LTCI due to scooter usage if I will need to be mobile for any length of time, I feel the need to let you know that had I purchased LTCI when I first started investigating I would be covered today. I felt, as many feel, that I could wait until I was around 60 but once I reached 60 I already had a scooter. I am unaware of any company that will write for someone in that situation. The cost does increase as one's age increases. Will my comment alter anyone's plans, who knows, but it is better to be armed with all information than less than 100%. Thankfully, I am currently totally able to take full care of myself but who knows when that might change. I recently became a widow so my husband will not be around if and when I need care nor can I count on my daughter to either provide care or funds. Am I a little frightened? Of course, but the only thing I can do about it is to make sure that my funds can and will cover any long term care I might need.

I also am too old to try for the LTCI as I'm 74 and had a heart attack this year. I have enough savings to take care of me if I remain fairly healthy. My children would be unable to care for me financially. So, I must take care of myself as well as I can and trust God for the rest. Good or bad, life will be what I make of it.

My husband was in Hospice and able to be home and fairly capable until the day he died. I had had experience in caring for the sick and elderly by working p/t for several home health agencies. My husband was only unable to do anything for 24-48 hours before his death. I realize I may not be as blessed, but I also cannot let the thoughts of what "could" happen lessen my enjoyment of life now.

@Emily "The longest-lived peoples of the world live well beyond age 90 and die w/o disease...and no government health care. It's worth looking at their lifestyles."

I'll suspect you find it's genes more than lifestyle. If your parents and grandparents lived to 90 w/out disease, chances are so will you. If not... I heard not stressing much over day-to-day problems helps too. But really, the biggest thing is non-smoking and statistically it adds about 10 years to life. Everything else after that is considerably less, I read somewhere it's a couple of years for not being obese, etc.

I think being childless and having some savings, I'll probably self insure too. I do have some long term care insurance through work, will consider what to do then.
But really, the healthy lifestyle is great, but not a guarantee. People overestimate the power of prevention. It helps, but not nearly to the extent people believe.

@Holly and @Apex,
I think the important thing to note about LTC is that it's not necesarily old-age related. What if you got hit by a bus tomorrow and needed care after the hospital? That would qualify you under some policies (like the group plan my company offers through Unum). I'm considering it at age 25 - only one grandparent has needed any sort of rehabilitative care (he passed away suddenly of semi-related causes), though not to the point of LTC per the specs in my company plan. IMO it can't be a bad idea to pre-save for potentially devastating costs down the road.

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