Author Topic: Long Term Care insurance as part of your FI plans?  (Read 10976 times)

MacGyverIt

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Long Term Care insurance as part of your FI plans?
« on: April 07, 2012, 06:23:43 PM »
I looked into LTC for my parents and it would've cost me $400 a month, which I decided to put into investments rather than LTC so at least when my folks needed it i'd be free to do with that money as I wished, rather than have to debate/negotiate my parent's long term care with an insurance provider. Does anyone have some work arounds that I haven't considered?

Don't Grow Old Without It
By KELLY GREENE

Long-term-care insurance: It can make the difference between living out your life the way you want and becoming a burden to your family or a ward of the state.

But it is becoming significantly more expensive, more complicated and harder to get with each passing year.

Average premiums on new policies—which help pay for nursing-home, assisted-living and home care—have risen some 6% to 17% in the past year alone, according to the American Association for Long-Term Care Insurance, a trade group. Some insurers have even doubled their premiums on existing policies. The increases come as the industry grapples with low interest rates and policyholders who are living a lot longer than the actuaries said they would.

At the same time, big companies like Prudential Financial and MetLife have stopped selling new policies in the individual market, continuing a trend that began several years ago. Ten of the top 20 writers of individual coverage five years ago have announced their exit, according to Limra International, an industry-funded research firm.

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Dominic Bugatto
Ken Kacenga, a 65-year-old doctor in Sierra Vista, Ariz., who plans to retire later this year, got hit with a 23% premium increase recently on the long-term-care insurance he and his wife bought several years ago. The couple struggled with whether to drop the coverage, he says, before finally deciding to keep it for another year while shopping around for other options.

"My fear is…it could become unaffordable as I get into the fixed-income stage of my life," Dr. Kacenga says.

Costs vary widely, even for coverage that is basically identical, according to a March study by the long-term-care insurance group. For example, a $150 daily benefit, lasting three years for a married couple aged 65 in "standard" health, ranges in price from $3,815 a year to $7,129.

That means you could pay nearly twice as much for the same benefits as someone insured by a different carrier.

Unfortunately for consumers, shopping around is difficult. Policies from different carriers are packaged with a proliferating number of bells and whistles. Life-insurance policies and annuities that include long-term-care benefits are introducing more options, but also making the selection process that much more involved.

So how can you figure out how to get the best deal on long-term-care insurance, whether you are buying it for the first time or being hammered with rate increases?

Besides your age and health, three factors have the biggest impact on determining your premium: the daily benefit, the length of coverage and the inflation protection you choose.

To get a sense of your future daily costs where you expect to live in retirement, go to Genworth.com/costofcare. Home care can cost much less than more-intensive institutional care. In Wilmington, N.C., for example, a home-health aide working 44 hours a week costs $40,566 a year, compared with $68,438 for a private nursing-home room with round-the-clock coverage.

You need to decide whether you want a policy to cover the bulk of your exposure, or if you would rather rely on other savings to supplement it, says Natalie Karp, a long-term-care insurance broker in Roslyn, N.Y.

"The new reality is, something is better than nothing," she says. "Get what's affordable and sustainable."

You also will need to select a coverage period, typically ranging from two to six years. If you select $250 a day for three years, for example, you would have a "pool" of $273,750 (multiply 250 by 365 and then by three). If you use less than $250 each day, your benefits would typically stretch longer than three years.

A decade ago, the conventional advice was to spring for unlimited lifetime coverage. That option has become so expensive and so unpredictable for insurers that some have dropped it altogether. Instead, for most people, it is best to choose a "short and fat" policy, with fewer years' coverage and a larger daily benefit. Most people buy three years' coverage, as the average nursing-home stay lasts about that long—though that could follow years of other care.

Many experts consider the level of inflation protection you choose to be the most crucial piece of the policy. Since people typically make their first claims around age 80, those buying policies in their 50s and 60s need to make sure their coverage keeps up with rising medical costs. (Home-health-care expenses remained flat this year, compared with 2011, but skilled nursing-care costs increased 4%, according to Genworth Financial.)

The most expensive—and widely recommended—option is 5% compound inflation protection, meaning your benefits increase in value by 5% each year. For example, your pool of $273,750 would be worth $726,343 in 20 years.

Then there are other inflation hedges meant for older buyers priced out of that option, including 3% or 4% compound, 3% or 5% simple (meaning a $100,000 benefit would simply get $3,000 or $5,000 tacked onto it each year), 5% compounded for 20 years only or one linked to the consumer-price index.

Brace yourself for a rate increase.

Insurers can't raise rates on individuals, but they can do so on a defined group of policyholders if they get state approval. Benny Stansbury, a 70-year-old retired engineer in West Monroe, La., dropped a policy he bought from a smaller carrier after being hit with a 105% rate increase.

The lesson: It pays to look for insurers that have strong financial statements and conduct significant business in your state.

The majority of rate increases should be over, now that insurers have factored in the impact of low interest rates on their ability to generate income to pay claims and lengthening life expectancies, says Dawn Helwig, a principal with actuarial firm Milliman in Chicago.

But many insurance brokers tell their clients to expect at least one increase in the 20% range at some point. If that happens, most insurers will allow you to reduce the increases in exchange for trims in benefits.

Insurance agent Nancy Courser helped Rob Deane, a 75-year-old retired Navy surgeon in Grand Rapids, Mich., lower the 77% rate increase on his 70-year-old wife's John Hancock policy to 46% this month by reducing her 10 years of coverage to six years. Rather than seeing premiums rise from $3,619 a year to $6,406, they will go up to $5,269.

Insurers are getting pickier.

Medical underwriting is getting "more conservative," says Buck Stinson, Genworth's president of U.S. insurance products, and rejection levels are growing.

Eleven percent of applicants under age 50 were denied in 2010, up from 7% in 2007; 17% of applicants in their 50s were denied, up from 14%; and 24% of those in their 60s were denied, up from 23%, according to the American Association for Long-Term Care Insurance.

Evidence of chronic conditions often knocks out applicants. People with diagnosed memory loss or arthritis are almost always denied, and insurers are getting tougher on osteoporosis and diabetes, experts say. Ms. Karp has even had clients rejected for being too thin.

Surprisingly, insurers approve survivors of some conditions, if they can show resolution and stability, including cancer, bypass surgery, Crohn's disease, congestive heart failure and forms of hepatitis, Ms. Karp says.

Insurers scrutinize two to three years' worth of medical records, including those kept by specialists, test results and prescription-drug databases. They also may require phone interviews and face-to-face meetings.

Rest up beforehand: Much of what your interviewer asks is designed to screen for cognitive problems. "They ask you to count down from 100 backwards, or you have to name as many fruits as you can," says David Hays, president of Comprehensive Financial Consultants in Bloomington, Ind.

Go for cash and flexibility.

A few insurers offer cash benefits of up to half your monthly allowance and require no receipts. You still have to meet the threshold for needing care that most insurers require: Documentation from your doctor that you require help with at least two "activities of daily living," which include bathing, dressing, eating, getting in and out of bed and to the bathroom, continence, and walking, or that you need care due to cognitive impairment.

With the cash option, the insurer cuts you a check with no other questions asked, which you can use to buy care however you wish, from hiring a family member to moving to a resort. This also can be useful if you plan to retire overseas, says Rona Loshak, Ms. Karp's business partner, though some policies limit how much cash can be used for international expenses.

Make sure your policy includes an "alternate care benefit," which generally features language recognizing that new trends in long-term care are emerging, and coverage could be provided in the future for those not specifically spelled out now. Today's more popular options—home care and assisted living—weren't even covered under many insurance policies issued two decades ago.

Also consider a "shared care" rider that gives you and your spouse access to each other's benefits if you use up your own.

Make the government your partner.

The Long-Term Care Partnership, a federal and state program now available in about 40 states through 30 insurers, lets people preserve some of their assets and still qualify for Medicaid if they have purchased a long-term-care insurance policy.

In most states, it works like this: You buy, say, $250,000 in coverage. If you use it up, you can qualify for Medicaid while protecting up to $250,000 in assets.

The catch: States generally require that you buy an inflation-protection rider and a specific amount of coverage. Depending on your age and health, that may not be affordable. If you were going to buy the coverage level that the state requires anyway, "there's no additional cost to buying a Partnership plan versus one that's not, so why not buy it?" says Mr. Hays.

Exploit tax breaks.

Depending on where you live, tax breaks could ease your payments significantly. New York, for example, offers a 20% income-tax credit for annual premiums. And if your spouse has medical bills steep enough to itemize on your federal tax return, you might reach the threshold to deduct premiums as a medical expense.

If you are a business owner or partner, the firm can deduct specified premium payments for you and your spouse, depending on your age, from your federal taxes owed. And if your business is a "C" corporation, it can deduct the entire bill. In that case, you may want to consider a policy with higher premiums that are due for only 10 years, or until you turn 65.

Consider a hybrid.

The biggest stumbling block for buyers of long-term-care policies: Writing a big check for a product you hope you never have to use. Increasingly, retirees are turning to permanent life-insurance policies and deferred fixed annuities packaged with long-term-care benefits to cover the risk of spending much of their savings on nursing care.

The appeal: You or your heirs get a payout even if you don't use long-term care, though it often is more costly to buy combined coverage than to buy separate policies, experts say.

In most cases, people buy these products with a single lump-sum payment, effectively removing the risk that they could get hit with future premium increases.

There are other tax perks as well: Payouts used for long-term care generally aren't taxable, and funds can be transferred directly from an annuity or life-insurance policy to buy such a "hybrid" without being taxed, either.

But there also is a big unknown: Most hybrid products have been around for only a few years, so very few people selling them have any clients who have tried to collect the benefits yet.

"We have no way of knowing if these policies will self-destruct in the future or not," says Mary Ahearn, a financial planner in Cochise, Ariz. "But they are offering to lock in our risk."

Write to Kelly Greene at kelly.greene@wsj.com

arebelspy

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Re: Long Term Care insurance as part of your FI plans?
« Reply #1 on: April 07, 2012, 10:45:59 PM »
Off topic note:
When you see an article somewhere, rather than copying the whole thing verbatim, can you cut out the most important or interesting snippets, and include a link to the whole thing?

Copyright and fair use is a sticky issue these days.
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sol

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Re: Long Term Care insurance as part of your FI plans?
« Reply #2 on: April 08, 2012, 08:23:40 AM »
I think long term care is one of the cases where it is better to self insure. 

brewer12345

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Re: Long Term Care insurance as part of your FI plans?
« Reply #3 on: October 09, 2013, 09:44:03 PM »
I think long term care is one of the cases where it is better to self insure.

Yup.

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Re: Long Term Care insurance as part of your FI plans?
« Reply #4 on: October 10, 2013, 06:58:19 AM »
I think long term care is one of the cases where it is better to self insure.

Yup.
Another vote for self-insuring. I had lunch yesterday with a friend who has both longevity and dementia/Alzheimer's in her family. She got a quote from her insurance agent for LTC: $500/month for her and her husband each.

She got a call from the agent a week later saying the insurer was increasing rates to ~$1,000/month per person. She decided against coverage. I told to her that this was common and that her rates could continue to go up in the future.

The bottom line is that insurers can't make this business work. Many in my state have stopped writing policies altogether. It's a very bad sign when an industry can't figure out how to price a product to both meet commitments and be profitable.

Cyrano

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Re: Long Term Care insurance as part of your FI plans?
« Reply #5 on: October 10, 2013, 12:01:31 PM »
If you're in your 50s, you might consider whether it makes sense to purchase a deferred income annuity that begins payout 30 years from now.

Even if I can walk and cook through my 80s, there are things involving ladders and the like that I will probably no longer be doing myself.

You might also consider waiting to act on this idea, if you think interest rates will ever reach 1990s like levels again.

MelodysMustache

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Re: Long Term Care insurance as part of your FI plans?
« Reply #6 on: October 12, 2013, 02:30:43 PM »
I am very biased in LTC insurance because I was a caregiver for ten years and it was pure hell.  There is no way I would ever put my family through that, so I got LTC insurance years ago when I was only in my 30s.  There may be a time when I need help, but I don't want to lean on my kids to provide that help.

Since I bought it early, it is only about $100 per month.  Perhaps over the long term I will wind up paying more for it, but as I said this was an emotional decision.  I don't think most people realize how difficult caregiving is on families.  It is just one of those things you have to experience to understand.  Also, I know that things can happen when you are young.  Nursing homes are not just for the very old.

LauraG

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Re: Long Term Care insurance as part of your FI plans?
« Reply #7 on: October 12, 2013, 04:38:34 PM »
I find the replies on this thread interesting because I had always thought of LTC insurance as something that people with a lot of assets needed more than other folks, since they have more to lose in the chance of needing long-term care. My parents are "self-insuring" for LTC (and right now have a high enough net worth to cover several years of nursing care, if it came to that), but they're also taking steps to shelter their principal from counting in Medicaid's asset tests. We have several (not genetically related) family members who burned through hundreds of thousands of dollars of net worth before Medicaid kicked in.

Personally, I'm not buying LTC insurance right now because I'm hoping for policy changes that might provide either (1) public payments for LTC before someone's assets are run down to zero or (2) policy changes that might make buying LTC insurance more affordable. But I'm still pretty young and I have some faith that with all the boomers going through their elderly years before me there might be some changes.

I am concerned about the topic, however, because my partner is 14 years older than me and I'm concerned about what would happen if he needed long-term care, thereby burning through my retirement savings.

Undecided

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Re: Long Term Care insurance as part of your FI plans?
« Reply #8 on: October 12, 2013, 05:21:34 PM »
I think long term care is one of the cases where it is better to self insure.

Yup.
Another vote for self-insuring. I had lunch yesterday with a friend who has both longevity and dementia/Alzheimer's in her family. She got a quote from her insurance agent for LTC: $500/month for her and her husband each.

She got a call from the agent a week later saying the insurer was increasing rates to ~$1,000/month per person. She decided against coverage. I told to her that this was common and that her rates could continue to go up in the future.

The bottom line is that insurers can't make this business work. Many in my state have stopped writing policies altogether. It's a very bad sign when an industry can't figure out how to price a product to both meet commitments and be profitable.

Great, but most of the people on this board seem to me to intend annual spending much lower than the cost of some types of long-term care, with only the assets necessary to support that annual spending, so what do you think self insuring means in this context? I think it requires substantially more assets than many here plan to have (and for me, it's a reason why I think many of the savings goals here are lower than I am comfortable with for myself).

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Re: Long Term Care insurance as part of your FI plans?
« Reply #9 on: October 12, 2013, 05:29:49 PM »
I find the replies on this thread interesting because I had always thought of LTC insurance as something that people with a lot of assets needed more than other folks, since they have more to lose in the chance of needing long-term care. My parents are "self-insuring" for LTC (and right now have a high enough net worth to cover several years of nursing care, if it came to that), but they're also taking steps to shelter their principal from counting in Medicaid's asset tests. We have several (not genetically related) family members who burned through hundreds of thousands of dollars of net worth before Medicaid kicked in.

Personally, I'm not buying LTC insurance right now because I'm hoping for policy changes that might provide either (1) public payments for LTC before someone's assets are run down to zero or (2) policy changes that might make buying LTC insurance more affordable. But I'm still pretty young and I have some faith that with all the boomers going through their elderly years before me there might be some changes.

I am concerned about the topic, however, because my partner is 14 years older than me and I'm concerned about what would happen if he needed long-term care, thereby burning through my retirement savings.

I can't really imagine what would make it more affordable.  As others have mentioned, a lot of the companies that used to sell LTC insurance are getting out of the business because they haven't been able to figure out how to make it profitable, and the others are raising rates.  If you're envisioning some sort of political change, I have a hard time imagining that coming to pass, given how difficult it's been to make any sort of change to more basic forms of health insurance. 

Another thing to consider which I haven't seen mentioned is that not every care facility takes Medicaid, depending on what sort of services you are looking for.

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Re: Long Term Care insurance as part of your FI plans?
« Reply #10 on: October 12, 2013, 05:33:58 PM »
There are two problems with self-insuring.  One is that you run the risk of running through all the assets your partner is depending on, as LauraG has just mentioned.  A shared room in a nursing home runs around $6000 per month in the cheaper states.  The average stay in a nursing home is a bit over two years (~$150,000).  The figures suggest that 3 in 10 people stay less than 100 days, but one in 10 stays 5+ years, which is $355,000+ in today's prices. (All this from http://health.usnews.com/health-news/best-nursing-homes/articles/2013/02/26/how-to-pay-for-nursing-home-costs with some additional bits from the experience of my two elderly relatives.)  Of course you don't know which category you'll be in.

Another problem is that once you've used up all your assets, you're stuck in the cheapest bed in the cheapest nursing home that will accept Medicaid.  Those options can be pretty grim.  LTC insurance may have payments that pay someone to come and help you at home once a day (certainly cheaper for them).  So LTC insurance may allow frail but mentally sound people to stay in their homes.  The reason good LTC insurance is so expensive and so hard to get is precisely because the need is so great and the expenses are so high.  All the more reason not to leave it to chance, the way I see it.  I'm not working for the industry.  I've just seen our family go through trying to support a nursing-home resident whose LTC insurance ran out.

LauraG

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Re: Long Term Care insurance as part of your FI plans?
« Reply #11 on: October 12, 2013, 06:11:26 PM »
I can't really imagine what would make it more affordable.  As others have mentioned, a lot of the companies that used to sell LTC insurance are getting out of the business because they haven't been able to figure out how to make it profitable, and the others are raising rates.  If you're envisioning some sort of political change, I have a hard time imagining that coming to pass, given how difficult it's been to make any sort of change to more basic forms of health insurance. 

Yes, I'm being optimistic that we'll see political changes in terms of LTC and/or LTC insurance the next 40 years. I don't think that's out of the realm of possibility because the currently system of (usually) not paying for in-home care ends up causing higher expenses on the part of Medicaid in the long run.

Quote
Another thing to consider which I haven't seen mentioned is that not every care facility takes Medicaid, depending on what sort of services you are looking for.

Yes, this is true. Part of why my parents are comfortable with their "self-insurance" with Medicaid backup plan is they are moving into a "continuum of care" retirement community with an entry fee model and a guarantee that residents will be able to stay in the community and access the assisted living, rehab, memory care, and nursing care facilities in the community (that guarantee relies on eventually drawing on Medicaid funding once the individual's assets run out, but the spouse is guaranteed the ability to stay in the community for their life even if the assets are gone).

It's also untrue, however, that all nursing homes that accept Medicaid are terrible. It depends on your area and what you find. When a friend of my family's ran out of money for her very expensive memory care facility, her family was freaking out, but they've ended up just as happy with the facility they found that accepts Medicaid.

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Lans Holman

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Re: Long Term Care insurance as part of your FI plans?
« Reply #13 on: October 12, 2013, 06:48:14 PM »
I can't really imagine what would make it more affordable.  As others have mentioned, a lot of the companies that used to sell LTC insurance are getting out of the business because they haven't been able to figure out how to make it profitable, and the others are raising rates.  If you're envisioning some sort of political change, I have a hard time imagining that coming to pass, given how difficult it's been to make any sort of change to more basic forms of health insurance. 

Yes, I'm being optimistic that we'll see political changes in terms of LTC and/or LTC insurance the next 40 years. I don't think that's out of the realm of possibility because the currently system of (usually) not paying for in-home care ends up causing higher expenses on the part of Medicaid in the long run.

Quote
Another thing to consider which I haven't seen mentioned is that not every care facility takes Medicaid, depending on what sort of services you are looking for.

Yes, this is true. Part of why my parents are comfortable with their "self-insurance" with Medicaid backup plan is they are moving into a "continuum of care" retirement community with an entry fee model and a guarantee that residents will be able to stay in the community and access the assisted living, rehab, memory care, and nursing care facilities in the community (that guarantee relies on eventually drawing on Medicaid funding once the individual's assets run out, but the spouse is guaranteed the ability to stay in the community for their life even if the assets are gone).

It's also untrue, however, that all nursing homes that accept Medicaid are terrible. It depends on your area and what you find. When a friend of my family's ran out of money for her very expensive memory care facility, her family was freaking out, but they've ended up just as happy with the facility they found that accepts Medicaid.

OK, I see what you are saying about a change that would make it more common for LTC to cover in home care.  I thought you were envisioning some sort of massive Obamacare-style reform to the whole industry, that's what I don't see happening. 
"Self-insuring" does make a lot more sense if you're in a CCRC.  The concern with those is that you have to really investigate the ownership and their stability, I've heard horror stories of people buying in for huge sums only to lose it when the company goes out of business. 
And yes, you're absolutely right that there are some perfectly good quality places that take Medicaid, but it does depend on what's available in your community and it's pretty important to research that before you find yourself in the situation your friend's family was in.

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Re: Long Term Care insurance as part of your FI plans?
« Reply #14 on: October 12, 2013, 09:51:40 PM »
I can't really imagine what would make it more affordable.  As others have mentioned, a lot of the companies that used to sell LTC insurance are getting out of the business because they haven't been able to figure out how to make it profitable, and the others are raising rates. 
If you deal with John Hancock's claims services then you'll quickly figure out a few ways to make it cheaper.  Right now they're spending far more on fraud prevention than they're losing in fraud, and many of their processes are still rooted in 1980s tech.

Only in the last six months has John Hancock actually started depositing my Dad's LTC claims payments electronically to his account.  They still follow up with a postal letter telling him that they made an electronic deposit.  The process is so cumbersome that I'm terrified of changing it, especially when the claim will be fully paid out in another year.

As for me, I'm counting on robots and really good video virtual-reality gaming systems.

brewer12345

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Re: Long Term Care insurance as part of your FI plans?
« Reply #15 on: October 13, 2013, 07:53:54 AM »
Great, but most of the people on this board seem to me to intend annual spending much lower than the cost of some types of long-term care, with only the assets necessary to support that annual spending, so what do you think self insuring means in this context? I think it requires substantially more assets than many here plan to have (and for me, it's a reason why I think many of the savings goals here are lower than I am comfortable with for myself).

Self insure means self insure.  That means you plan to have the assets to cover the care you will likely or possibly need.  If you don't have the assets, you can't self insure.

If a single pay or short pay LTC policy were available from a strong insurer, I would have to seriously evaluate it.  That is not a feature of the market at present.

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Re: Long Term Care insurance as part of your FI plans?
« Reply #16 on: October 13, 2013, 08:59:10 AM »
If a single pay or short pay LTC policy were available from a strong insurer, I would have to seriously evaluate it.  That is not a feature of the market at present.
With what we know about today's LTC policies and policy lapse rates, I'd be extremely skeptical of a single-pay or short-pay LTC policy.  Even if the insurer was allegedly financially strong and fiduciary and had smart actuaries, I'd see it as a risky grab for market share. 

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Re: Long Term Care insurance as part of your FI plans?
« Reply #17 on: October 13, 2013, 01:34:38 PM »

Self insure means self insure.  That means you plan to have the assets to cover the care you will likely or possibly need.  If you don't have the assets, you can't self insure.


Of course. I meant it rhetorically, as in, I think it's a consideration that doesn't seem to be reflected very often in the mustachian budgets and "4% SWR" so often discussed here. Or maybe I just have unrealistically high estimates of what we may spend on long-term care.

Cyrano

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Re: Long Term Care insurance as part of your FI plans?
« Reply #18 on: October 13, 2013, 06:37:21 PM »
The ancient Stoics did have a low cost alternative to long term disability. Purely on a voluntary basis, but still.

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Re: Long Term Care insurance as part of your FI plans?
« Reply #19 on: October 13, 2013, 07:02:54 PM »
The ancient Stoics did have a low cost alternative to long term disability. Purely on a voluntary basis, but still.
Hunh, what a coincidence.  My spouse says that she purchased my LTC policy from that company.  She says she got a great deal on it, too!

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Re: Long Term Care insurance as part of your FI plans?
« Reply #20 on: July 01, 2014, 09:18:06 AM »
I feel I've got no choice but to investigate LTC insurance for the future. But I need to shop very carefully.

My mother was in an ALF in FL which she could afford since she had a government pension plus SS. Since she's passed, my brother and I have become responsible for her twin sister, who we moved to an ALF in NC which is cheaper than in NY where my brother is - but still runs baseline $4500/month. Add in health insurance and drug supplements to Medicare, and there is still a gap. But her SS puts her over the limit for Medicaid here...My mother's ALF in FL was high end but way too populated and the staff was unstable. There are only app. 40+ residents in my aunt's ALF and the staff is very caring, with a hands-on director. Still, my husband and I show ourselves several times a week so they see a family presence.

We applied for VA Aid & Attendance which she finally received after almost a 2-year wait. (A&A is available to spouses of veterans who have served in specific wars such as WWII. Unlike regular VA benefits, the veteran need not have been injured or disabled. The program is need/expense based.) My aunt has dementia, is incontinent and practically wheel-chair bound and uses oxygen. There's no way my husband and I, or my brother and his wife could care for her.

I joke with my husband that I want to have cyanide pills handy when we get older. We're working on FI in app. 3 years and plan to manage on the 3-4% rule. But unforeseen healthcare expenses could put a damper on things, to say the least. There is always Ecuador and other countries where we could live nicely and less expensively, but those don't seem like places, yet, where one would want to end up if needing round the clock healthcare attention.

castoriehandley93

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Re: Long Term Care insurance as part of your FI plans?
« Reply #21 on: August 26, 2014, 06:37:09 PM »
Far beyond it. Long-term care insurance has been an issue for so many years now. Many deem that it is an insurance policy for the rich which constitutes its underlying meaning, it is not really necessary. The doubt is totally understandable. Why would you even purchase an insurance policy that only has a 50-50 percent chance of use? Not to mention that the disease it covers is quite limited. We will all grow old but the chances of growing old with dementia or ALS is unknown...unless you have a family history, of course.

However, one cannot be so sure nowadays. Cancer and stroke is just as rampant as flu. Besides, ltci does not only cover various diseases. There are companies that include services outside the holder's nursing/assisting needs like dental care, monthly eye check-ups and such.

And yes, one more thing. The success or importance of having a long-term care insurance differs from people to people, from case to case. Just make the smart choice. The cost of a being in a long-term care is climbing. There are some who really don't need one but there are others who do. That's why it is important to talk to your carrier and tailor a policy that will suit your needs. 
« Last Edit: September 03, 2014, 12:35:40 AM by castoriehandley93 »

VirginiaBob

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Re: Long Term Care insurance as part of your FI plans?
« Reply #22 on: October 24, 2014, 06:34:34 PM »
No history of cancer or strokes in my family or anything like that, so my risk isn't too high to need it.  But I think since we have 3 kids with probably adding 2 more, my long term care insurance is going to be: "who wants to inherit dad's stache?".  Haha!

Yankuba

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Re: Long Term Care insurance as part of your FI plans?
« Reply #23 on: December 25, 2015, 05:11:08 PM »
Commenting to follow

An article from the NYT:

http://mobile.nytimes.com/2015/12/26/business/long-term-care-insurance-can-be-costly-but-effective.html?emc=eta1&referer=

My uncle is a public policy professor and we chatted about this over email. One thing of interest:

"Another exception: Among those who have no kin-provided LTC, Medicaid is the main provider. But that is means-tested. If your income is greater than about 138% of the Federal Poverty Level and your assets (aside from the home you live in and one old car) total more than $4,000 you can't get Medicaid. If you have more than that, you have to spend your own money on LTC until you "spend down" to the required level.

This "spend-down" is a heartbreaking story. Most elderly do not have a lot saved up but what they do have of their lifetime savings and investments disappears very quickly (in most cases within 3 - 6 months, rarely more than a year) as they become disabled and need LTC services (especially nursing home care) that cannot be provided by a spouse or other kin. I routinely speak to middle class professional people who retired at 65 or 70 with half a million dollars in savings, and 5 years later they are on Medicaid.

Beyond that, unless you are a veteran, there is no free LTC. If you don't have LTCI, you have to pay for any LTC services you get that is not from family. At market rates, it is devilishly expensive. Unless you are fabulously wealthy, you will be working at your own "spend-down" until whatever wealth you have is spent down to qualify for Medicaid."
« Last Edit: December 26, 2015, 07:42:50 AM by Yankuba »

sol

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Re: Long Term Care insurance as part of your FI plans?
« Reply #24 on: December 25, 2015, 08:33:07 PM »
Unless you are fabulously wealthy, you will be working at your own "spend-down" until whatever wealth you have is spent down to qualify for Medicaid.

All of us will fit into one of those two categories, though, right?  Either you're wealthy enough that you can afford to pay $50-100k per year for long term care out of your investments/pension/annuities/SS, or you're not and you spend down to Medicaid levels.  This seems like a self-solving problem to me.

The only people who get burned in this system are people who are a tiny bit wealthy and want to give away their money to kids or charities, and instead have to spend it on their own eldercare.  I don't have a ton of sympathy for those people; we'd all like to give away more money than we have but that's rarely an option because we all have personal expenses.

Merrie

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Re: Long Term Care insurance as part of your FI plans?
« Reply #25 on: January 11, 2016, 09:11:23 AM »

All of us will fit into one of those two categories, though, right?  Either you're wealthy enough that you can afford to pay $50-100k per year for long term care out of your investments/pension/annuities/SS, or you're not and you spend down to Medicaid levels.  This seems like a self-solving problem to me.

My main worry is for the surviving spouse; when all the assets get spent down for Medicaid, what are they going to live on? I saw a "community spouse Medicaid" program that let them keep $100k, but that's not much.


So I suppose if something happens to me, my disability benefit lasts until I'm 65 at which point my husband will be 70. In the worst-case scenario (assuming he never works again, since his career went poof in 2014) if I'm in care and so our assets go poof after that, he still has 4k a year from his own pension, whatever income that 100k throws off, a paid-off house, and 1k a month or so from my Social Security benefit. If something happens to him, I'll just keep working until I'm old enough to draw Social Security. It doesn't seem ideal but maybe it's workable. But the alternative is to save up a much bigger stash or to buy the horrendously expensive insurance.

Vagabond76

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Re: Long Term Care insurance as part of your FI plans?
« Reply #26 on: January 11, 2016, 09:56:30 PM »
One advantage of whole life insurance (and its not too expensive if you set it up right) is that you can access the accrued cash value, tax-free, for long term care.

Monkey Uncle

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Re: Long Term Care insurance as part of your FI plans?
« Reply #27 on: January 12, 2016, 04:44:06 AM »
One advantage of whole life insurance (and its not too expensive if you set it up right) is that you can access the accrued cash value, tax-free, for long term care.

Seems like it would be better to just invest in a normal stock/bond/real estate allocation and access the value of your portfolio for long term care if/when you need it.  A whole life policy is likely going to have a lower return on your investment because the insurance company has to fund expenses and profit out of the investment returns that your premiums earn. What's left over after those expenses is what goes into your policy's cash value.

Scandium

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Re: Long Term Care insurance as part of your FI plans?
« Reply #28 on: January 12, 2016, 11:03:38 AM »

All of us will fit into one of those two categories, though, right?  Either you're wealthy enough that you can afford to pay $50-100k per year for long term care out of your investments/pension/annuities/SS, or you're not and you spend down to Medicaid levels.  This seems like a self-solving problem to me.

My main worry is for the surviving spouse; when all the assets get spent down for Medicaid, what are they going to live on? I saw a "community spouse Medicaid" program that let them keep $100k, but that's not much.


So I suppose if something happens to me, my disability benefit lasts until I'm 65 at which point my husband will be 70. In the worst-case scenario (assuming he never works again, since his career went poof in 2014) if I'm in care and so our assets go poof after that, he still has 4k a year from his own pension, whatever income that 100k throws off, a paid-off house, and 1k a month or so from my Social Security benefit. If something happens to him, I'll just keep working until I'm old enough to draw Social Security. It doesn't seem ideal but maybe it's workable. But the alternative is to save up a much bigger stash or to buy the horrendously expensive insurance.

Spouse issue is certainly the worry. I dont consider it a big deal if I have to go to a nursing home at $100k/year. According to the stats I might only live there 3-5 years anyway. $500k is a lot of money, but I should have that left in my portfolio at that point, and I'll be dead after so won't need it. That's fine. Using it all up leaving my wife with zero is a problem though.

But if I may engage in some optimism I think it'll be ok, at least in our situation. Anyone who retire early at 4% WR (say in their 40s) will have a much larger portfolio at the point when they might need care, 70s-80s. Historically double or more of starting portfolio. In addition we don't count on social security in the withdrawal rate, which might be something like $50k/year extra for the two of use after 67. And I expect some inheritance windfall to boost our portfolio before I reach 80 as well, which I also haven't calculated in now. So between all this, if we have to pay $500k in care for one of us, then feed the survivor a while, then that person needs another $500k in care I think that's totally doable.

*granted our spending, and thus savings goal, is higher than many here, probably $1.5 mill. If you retire on a $500k portfolio I can see how it would be hard.