Author Topic: What do you have planned for longterm care?  (Read 16887 times)

Exhale

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What do you have planned for longterm care?
« on: August 13, 2016, 10:36:25 AM »
I was wondering what FIRE folks plan to use for longterm care should it be necessary due to disability, illness, etc. I'm a child free single person and want to be sure I have access to good quality longterm care should I need it. (Note: this is not at all to imply that having kids and/or a partner equals built-in longterm care!) Thank you in advance for any advice/information you may have.

seattlecyclone

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Re: What do you have planned for longterm care?
« Reply #1 on: August 13, 2016, 04:04:42 PM »
Someone following the 4% rule is very likely to end up with way more money than they need for their day-to-day retirement. I'll pay for any needed long-term care out of the likely surplus at the end of my life. In the unlikely event that 4% withdrawals leave me with very little money left over, there's always Medicaid.

Libertea

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Re: What do you have planned for longterm care?
« Reply #2 on: August 13, 2016, 04:10:31 PM »
I think what you choose to do depends on your age, your current state of health, and your resources (both financial and family).  People generally need LTC in their 70s or later, and many NH stays are considerably less than three years.  But everyone's situation is different.  If you are in poor health, have a family history of early Alzheimer's, or otherwise anticipate needing extensive LTC (and/or becoming uninsurable in your middle age), then insurance may be worth considering, especially as you approach middle age. 

I am 41, healthy, and also single/child free.  None of my relatives on either side have required extensive NH stays.  Given my time frame and low odds of requiring extensive LTC, I decided to self-insure by adding an additional $50,000 to my FI stash to cover LTC expenses. 

If you do decide to go with purchasing insurance, make sure to buy from a reputable company, especially if you are young.  One of the problems with LTC insurance (besides the exorbitant expense) is that there is such a long time frame between when you buy it and when you might potentially use it.  You don't want your insurance company to become insolvent and go out of business after you've been paying them premiums for a decade or two.

Exhale

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Re: What do you have planned for longterm care?
« Reply #3 on: August 13, 2016, 04:32:31 PM »
Thank you Libertea for this information. I like the idea of adding $50,000 to the stash and also will research reputable companies so I can add that info to my estate planning. I don't anticipate problems, but want to have a back-up in case of an unexpected health crisis. Also, I want to do what I can now to help make my elder years a time spent in a safe and caring situation.

Quick question: what does "NH" stand for?

Libertea

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Re: What do you have planned for longterm care?
« Reply #4 on: August 13, 2016, 04:44:12 PM »
Thank you Libertea for this information. I like the idea of adding $50,000 to the stash and also will research reputable companies so I can add that info to my estate planning. I don't anticipate problems, but want to have a back-up in case of an unexpected health crisis. Also, I want to do what I can now to help make my elder years a time spent in a safe and caring situation.

Quick question: what does "NH" stand for?
Haha, sorry.  NH is my (probably nonstandard) abbreviation for nursing home.

Keep in mind that most LTC plans do NOT pay for assisted living (AL) or home care options unless you specifically buy those.  NH care is obviously the most expensive since it's full-service.  However, I anticipate the likelihood of my needing AL care is much higher than my likelihood of needing NH care, given that I am a single woman with a reasonable chance of living to my 90s.  If you decide that is the case for you, too, and you decide to go with commercial insurance, then make sure you get a plan that includes AL or home care coverage.

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Re: What do you have planned for longterm care?
« Reply #5 on: August 14, 2016, 01:54:34 AM »
Single and childfree here too.  I'll pay from my stash as I need to, and if I make a permanent move to assisted accommodation I can sell my primary residence.  The other thing to do is to make sure you are plugged into your local community, both for the best information on local care options and having a selection of people around you who know you and care about your wellbeing.

mathjak107

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Re: What do you have planned for longterm care?
« Reply #6 on: August 14, 2016, 03:55:43 AM »
the problem with statistics is humans only have two outcomes . crap happens to us ,since it has to happen to someone , or it  does not happen to us .

my dad had a stroke and spent 6 years in a nursing home . my co-worker at 55 fell off a ladder and broke his hip . he had a stroke during surgery that left him paralyzed . financially now his wife is devastated .

depending on costs in your area if you need care it can leave the stay at home spouse impoverished .



the only question you need to answer if you are married is will my spouse be impoverished if i have to go in a home if i am the lucky one with the extended stay ? it has to be someone so it could always be you .

can she pay for both me and make it financially without a major upset .

if the answer is yes , she would find it very hard to manage then you need to come up with a better plan no matter what you decide .

rolling the dice and hoping it isn't you or your spouse that needs the care is a poor idea . hope is never a strategy . especially because now you have 2 bets and only 1 horse .

 when you are married you have to both escape it . either one of you can tip the apple cart over . those are 2x greater odds of things not playing out in your favor . .

talk to any busy estate attorney and they will all tell you that the bulk of their clients are those that had no real plan and called it self insuring .

now that reality struck and someone needs care all of a sudden they are scrambling to preserve assets as the community spouse ( stay at home ) goes in to survival mode .

so whatever you decide to do , do it and don't wait until after it is to late .

it isn't about preserving assets as much as the survival of your spouse .

have a meeting with a good elder law attorney and familiarize yourself with the options , laws and tools in your state . then you can make a decision with their guidance . as you see in these discussions most folks have no plan and no clue as to what is a good move and what isn't .

they think because they have a living trust that is a comprehensive plan and they are covered and medicaid can't get to anything . but they fail to realize everything in a revocable trust counts as dollars and that they can't qualify for medicaid with the items in the trust . the old catch 22 gets ya .


some of your options can be :

making medicaid approved family loans

irrevocable trusts

long tern care insurance

hybrid life insurance policy's with long term care links

right of refusal

real- self insuring , not just your general portfolio invested in things that are volatile .

attorney negotiated medicaid rates

and likely a lot more that i am not aware of .

but none except a state partnership plan and LTC cover everything . you can save assets but lose the income for the stay at home spouse so everything else has pitfalls .


« Last Edit: August 14, 2016, 04:14:59 AM by mathjak107 »

mathjak107

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Re: What do you have planned for longterm care?
« Reply #7 on: August 14, 2016, 04:09:27 AM »
i should add  that after much thought about self insuring we went with a ny state partnership plan .

we wanted it not so much for the 3 years insurance , even though a snf is 120k-140k a year in our area , we wanted it for the perks after the insurance ran out .

no shifting of assets , full asset protection , pretty much full income protection for the stay at home spouse  , a special version of medicaid picks up the bills after the insurance runs out .

i mentioned in another thread , the fact that money magazine did a feature story on us years ago .

they wanted to put their team of pro's against me  since i did all my own planning .

i wanted to self insure and they were against it for so many reasons . they were right .

those who say they are self insuring really have no plan . they hope they don't need care and they hope they have the funds .

but once the stay at home spouse goes in to survival mode those funds become a battle ground usually .

the issue with self insuring is that like any insurance :

you need the funds to cover you day 1  and it has to be guranteed to grow with inflation as healthcare has been seeing wicked increases . you have to invest that insurance money in a safe and secure fashion . it can not just be thrown in the pool of money generating your income since that assumes it can always go to zero doing so .

to self insure  properly means safe low returns on that money .

for just a small percentage of the gains from keeping our money invested normally we can pay for a full blown , inflation adjusted policy that covers 3 years in a snf or 6 years assisted living or in home care .

so we ended up going the policy route .

most of our attorney's work today is the self insurer's . they are scrambling at the last minute trying to preserve assets and to protect the income of their spouse .

once reality sets in that hundreds of thousands of dollars could possibly be going out the self insuring suddenly becomes a poor idea  to them .

« Last Edit: August 14, 2016, 04:19:36 AM by mathjak107 »

Libertea

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Re: What do you have planned for longterm care?
« Reply #8 on: August 14, 2016, 05:09:51 AM »
Mathjak: while I appreciate the time and effort you put into writing your posts, I think you missed the part where both the OP and I noted that we are SINGLE and CHILDFREE.  Thus, there is no concern in either of our cases for a spouse becoming impoverished or for not leaving an inheritance for the kids.  In our situations, we DO have the option to spend down every dime of our respective stashes, and that greatly affects the options available to us, including the reasonableness of considering self-insurance.

I would add that I am not convinced of the value of LTC insurance for everyone even if they do have a spouse.  It really depends on one's overall financial resources.  If you are wealthy (say, you have at least a couple million dollars in your stash), the likelihood of your spouse being impoverished even if you go into LTC for a few years is quite low.  People with large enough stashes can simply pay for LTC out of pocket and have plenty of money left over.  If you have relatively little in savings (say, less than a few hundred thousand dollars), you will simply use up your assets and go on Medicaid, which is what many people without retirement funds do by default because they can't afford to pay the LTC premiums even if they wish to do so.  So in either of these cases, self-insurance may still make sense even in the event that one has a spouse (and for the low-income person who can't afford LTC insurance, it may be the only possible choice).

It is primarily the people in the middle (say, in the $250,000 to $1.5 million stash range) who have a tough decision to make regarding whether to buy LTC insurance vs self-insure.  And here, it definitely DOES matter whether one has dependents/beneficiaries for whom one needs to leave resources.  If I have $1 million and am willing to spend as much as needed on myself, then that will more than cover the same three years of NH coverage that most LTC plans will provide.  So basically, my plan would be equivalent to upping my living expenses from what they are in the community to what they would be in the ALF or NH.  I can afford to do that by raising the amount of my stash needed for FiRE, and that is what I have chosen to do.  I respectfully disagree that consciously deciding to self-insure is "not a plan," and in fact, I would argue that it is a very reasonable plan in many cases (albeit maybe not yours), including for many singles with moderate levels of wealth like myself.

Regarding the mechanism of self-insurance, I don't have the LTC self-insurance funds separately invested.  I simply kept my same overall AA and added an extra $50,000 (determined via a TVM calculation based on average cost of LTC and average age when it would most likely be needed) to the total amount I was already projecting I would need for retirement/FI. 

mathjak107

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Re: What do you have planned for longterm care?
« Reply #9 on: August 14, 2016, 05:17:40 AM »
it is more general points of information for everyone .

mathjak107

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Re: What do you have planned for longterm care?
« Reply #10 on: August 14, 2016, 07:35:54 AM »
Mathjak: while I appreciate the time and effort you put into writing your posts, I think you missed the part where both the OP and I noted that we are SINGLE and CHILDFREE.  Thus, there is no concern in either of our cases for a spouse becoming impoverished or for not leaving an inheritance for the kids.  In our situations, we DO have the option to spend down every dime of our respective stashes, and that greatly affects the options available to us, including the reasonableness of considering self-insurance.

I would add that I am not convinced of the value of LTC insurance for everyone even if they do have a spouse.  It really depends on one's overall financial resources.  If you are wealthy (say, you have at least a couple million dollars in your stash), the likelihood of your spouse being impoverished even if you go into LTC for a few years is quite low.  People with large enough stashes can simply pay for LTC out of pocket and have plenty of money left over.  If you have relatively little in savings (say, less than a few hundred thousand dollars), you will simply use up your assets and go on Medicaid, which is what many people without retirement funds do by default because they can't afford to pay the LTC premiums even if they wish to do so.  So in either of these cases, self-insurance may still make sense even in the event that one has a spouse (and for the low-income person who can't afford LTC insurance, it may be the only possible choice).

It is primarily the people in the middle (say, in the $250,000 to $1.5 million stash range) who have a tough decision to make regarding whether to buy LTC insurance vs self-insure.  And here, it definitely DOES matter whether one has dependents/beneficiaries for whom one needs to leave resources.  If I have $1 million and am willing to spend as much as needed on myself, then that will more than cover the same three years of NH coverage that most LTC plans will provide.  So basically, my plan would be equivalent to upping my living expenses from what they are in the community to what they would be in the ALF or NH.  I can afford to do that by raising the amount of my stash needed for FiRE, and that is what I have chosen to do.  I respectfully disagree that consciously deciding to self-insure is "not a plan," and in fact, I would argue that it is a very reasonable plan in many cases (albeit maybe not yours), including for many singles with moderate levels of wealth like myself.

Regarding the mechanism of self-insurance, I don't have the LTC self-insurance funds separately invested.  I simply kept my same overall AA and added an extra $50,000 (determined via a TVM calculation based on average cost of LTC and average age when it would most likely be needed) to the total amount I was already projecting I would need for retirement/FI.

believe me i was in the self insure camp for quite a while . but that was until we saw just what  was happening when the time came  to have to part with 120-140k a year in our area .

as mike tyson so elegantly said "everyone has a plan until they get punched in the face "

i am not saying for some it can't work out , depending on your location it may not be to bad  , but i think if you speak to an elder law attorney who is very popular in that area of law  , they will tell you the bulk of their work is dealing with those who now got punched in the face .

the very wealthy can usually pay for this care , those under 1 million in assets likely don't need it . but i think it is the 1-3 million range that can have problems .

i know pulling an extra 120k a year in draw on top of our regular numbers would really hurt my wife or i after a few years . the 6 years my dad spent in a home drained them totally .




« Last Edit: August 14, 2016, 08:07:18 AM by mathjak107 »

Life in Balance

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Re: What do you have planned for longterm care?
« Reply #11 on: August 14, 2016, 07:41:30 AM »
Libertea:  Can you expand on how you calculated the extra $50,000 for the stash to self-insure?  Am in the same situation and trying to figure out those calculations now so I can plan for the future. 

Exhale

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Re: What do you have planned for longterm care?
« Reply #12 on: August 14, 2016, 09:35:54 AM »
Many thanks Libertea for such helpful information for those of us who are single and child free - greatly appreciated. Also, thank you for naming NH (that abbreviation works for me!) and AL (assisted living). I was using the term "long-term care," but that's not specific enough since AL and NH can be quite different scenarios.

If you have the time and inclination, I'd second the Life in Balance's request re: more explanation of on how your calculated the extra $50,000 to self-insure. My stash is moderate and I have no one depending on me so I believe that my choices will be similar to what you have done. Again, thank you for your comments and information.

Bicycle_B

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Re: What do you have planned for longterm care?
« Reply #13 on: August 14, 2016, 10:19:19 AM »
Fwiw, I agree that both plans (insure, self insure) can be valid, depending on individual goals/circumstance.

Recently experienced the whole assisted-living-and-bits-of-nursing-home deal (relative passed away last year, I was guardian for their last 2-3 years).  No insurance for care, moderate assets (a few hundred thousand $), substantial defined-benefit pension.  Assisted living cost 40K-50K per year in cheap area of USA, choosing the best quality we could find without seeking outright luxury; covered a private room or suite, depending on care level.  Ultimately, pension covered most of his expenses while a rising market covered the rest.  It could have have gone differently, though.

Quality varied despite our best efforts.  I advise you to do anything in your power to build a support team in advance that will monitor / bird dog the caregivers because even the good ones can make mistakes.  Consider allying yourself with several other smart independent people so that whoever is healthy can oversee the care for the ones who get sick... each person provides their own financial resources, but someone needs to be the advocate for the person who cannot do it on their own.  Set up a living will, a financial power of attorney, a medical power of attorney, and friends/relatives who care about you.  Cultivate relationships if you don't have enough of them, their visits can make a big difference.  So many people get warehoused with bad care because no one checks on them.

It's hard to know how many years of care to plan for.  Nonetheless, for people who are very thrifty, realize that the $400K that "will last for 30 years" on your 4% withdrawal rate aka $16,000 per year, your cost per year for Assisted Living may be more than what you are used to.  Obviously the single situation (like me and OP) is simpler than mathjak's. 

Fwiw, I suggest defining the type and level of care you'd like in a couple of key scenarios (Alzheimer's, significant physical disability), research to find out what Medicare/Medicaid will pay for in those cases, and what private insurance would pay for.  There are tradeoffs (cost vs quality on one side, time of extra work vs enjoyment time on the other when approaching FIRE) for both insurance and self-insurance. 

My personal take is that I detest the noisy environment of most assisted living facilities so the insurance won't buy me what I want... I would like to self insure to the point of having inhome care if needed but that's more expensive than I will be sure of being able to cover with the stash, depending on how long I need it for.  Insurance would give some more certainty, but not achieve my goals, so either case leaves me simply accepting that I may or may not get everything I want.  Currently I am "self insured" by Mathjac's "not a plan" plan, with the intent to explore insurance again in another year or two; I've researched it moderately twice.  I expect to buy some long term care insurance within the next 5 years and maintain it after that.  My family (siblings, etc.),  uncomfortable with FIRE and aware that I am not fully FI yet, will sleep easier when I have it even though I think it will only change my safety level a little bit.

Part of the calculus was, like a previous poster, to consider allocating an extra amount such as $50K, project investment gains to age 70 (my approximate estimated date of use), and compare with projected benefits.  It appeared to me that likely benefits were not much more than the investment, so I have self insured, but the insurance aspect of paying for problems I don't anticipate strengthens the insurance case some.  If I buy it, the family factor will be part of what I am buying.  It's a way to tell people "Don't worry, there's enough money, you don't ever have to pay my bills, just run the checkbook and check up on me". 
« Last Edit: August 14, 2016, 10:37:57 AM by Bicycle_B »

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Re: What do you have planned for longterm care?
« Reply #14 on: August 14, 2016, 10:44:47 AM »
I would just add that there is a point at which your expenses are likely to go up even before the need for formal care arrangements kicks in.  If you can no longer do all your home maintenance and gardening, if you can't walk or bike as far and need to pay for transport, if you need help with housework, shopping and cooking, then your costs go up from when you were hale and hearty.  Other costs may of course go down (you can't travel as much, or go out as much - or don't want to).

seattlecyclone

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Re: What do you have planned for longterm care?
« Reply #15 on: August 14, 2016, 11:37:54 AM »
Here's a paper with some statistics about length of nursing home stay. It says that 25% of people stay in a nursing home before death, and 75% of those stay 20 months or less before passing away. So while the "six years in a nursing home" scenario certainly is a possibility, it is a very unlikely outcome, with fewer than 6% of seniors even needing two years of nursing home care.

Consider also that the 4% rule is inherently conservative. It's possible that you'll almost run out of money after 30 years, sure, but the much more likely alternative is that your money grows faster than you spend it. Per cFIREsim's default settings, the median amount someone using the 4% rule will end up with after 30 years is 55% more than they started with. In fact, you end up with at least a little more than you started with something like two-thirds of the time, after adjusting for inflation.

So, 6% chance of needing nursing home care for more than two years, combined with a 33% chance of your stash losing money over a 30-year retirement adds up to a 2% chance that you might have long-term care needs that you can't simply pay for out of pocket.

Figures from the American Association for Long-term Care Insurance say that a policy to cover a married couple, for up to $150 of care per day, for only the first three years of care, cost an average of $2,466 per year in 2012 for a couple that starts paying premiums at age 55. Of course $150 of care per day is only $50k/year (well below the cost mathjak has been quoting), and a limitation for the first three years doesn't really even cover the doomsday scenario of needing care for several years. A policy with coverage past three years that covers the actual cost of a more expensive care facility would cost even more than that, and I've read prices for this insurance have gone way up recently.

So it comes down to a question of do I think it's worthwhile to pay thousands of dollars per year to insure myself against the unlikely possibility of needing care that I can probably pay for out of pocket anyway? Perhaps when I get closer to the age where I might need that care I will change my tune, but as of now I'm pretty comfortable with the odds.

Bicycle_B

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Re: What do you have planned for longterm care?
« Reply #16 on: August 14, 2016, 01:21:53 PM »
Here's a paper with some statistics about length of nursing home stay. It says that 25% of people stay in a nursing home before death, and 75% of those stay 20 months or less before passing away. So while the "six years in a nursing home" scenario certainly is a possibility, it is a very unlikely outcome, with fewer than 6% of seniors even needing two years of nursing home care.

Consider also that the 4% rule is inherently conservative. It's possible that you'll almost run out of money after 30 years, sure, but the much more likely alternative is that your money grows faster than you spend it. Per cFIREsim's default settings, the median amount someone using the 4% rule will end up with after 30 years is 55% more than they started with. In fact, you end up with at least a little more than you started with something like two-thirds of the time, after adjusting for inflation.

So, 6% chance of needing nursing home care for more than two years, combined with a 33% chance of your stash losing money over a 30-year retirement adds up to a 2% chance that you might have long-term care needs that you can't simply pay for out of pocket.

Figures from the American Association for Long-term Care Insurance say that a policy to cover a married couple, for up to $150 of care per day, for only the first three years of care, cost an average of $2,466 per year in 2012 for a couple that starts paying premiums at age 55. Of course $150 of care per day is only $50k/year (well below the cost mathjak has been quoting), and a limitation for the first three years doesn't really even cover the doomsday scenario of needing care for several years. A policy with coverage past three years that covers the actual cost of a more expensive care facility would cost even more than that, and I've read prices for this insurance have gone way up recently.

So it comes down to a question of do I think it's worthwhile to pay thousands of dollars per year to insure myself against the unlikely possibility of needing care that I can probably pay for out of pocket anyway? Perhaps when I get closer to the age where I might need that care I will change my tune, but as of now I'm pretty comfortable with the odds.

Great comments, SeattleCyclone.  Big thanks for posting a serious study with legitimate data.

One thing to remember is that some people (including insurance companies and Medicare) distinguish between nursing homes and assisted living facilities.  As I understand it, the difference is whether there is 24 hour nursing care.  Yes means it's a nursing home, no means it's assisted living.  The study focused on nursing home care, but many people also spend additional time in assisted living.  So the costs implied in the study cover only a portion of the risk.

The case I experienced had 3 weeks of nursing home care, much less than than the study's mean of "13 months + or - 18".  But we still needed to pay for about 2.5 years of assisted living. 

Possibly the difference between Mathjac's costs (over 100K per year) and ours (more like 50) were the difference between nursing homes and assisted living.

« Last Edit: August 14, 2016, 01:23:39 PM by Bicycle_B »

mathjak107

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Re: What do you have planned for longterm care?
« Reply #17 on: August 14, 2016, 01:34:48 PM »
Here's a paper with some statistics about length of nursing home stay. It says that 25% of people stay in a nursing home before death, and 75% of those stay 20 months or less before passing away. So while the "six years in a nursing home" scenario certainly is a possibility, it is a very unlikely outcome, with fewer than 6% of seniors even needing two years of nursing home care.

Consider also that the 4% rule is inherently conservative. It's possible that you'll almost run out of money after 30 years, sure, but the much more likely alternative is that your money grows faster than you spend it. Per cFIREsim's default settings, the median amount someone using the 4% rule will end up with after 30 years is 55% more than they started with. In fact, you end up with at least a little more than you started with something like two-thirds of the time, after adjusting for inflation.

So, 6% chance of needing nursing home care for more than two years, combined with a 33% chance of your stash losing money over a 30-year retirement adds up to a 2% chance that you might have long-term care needs that you can't simply pay for out of pocket.

Figures from the American Association for Long-term Care Insurance say that a policy to cover a married couple, for up to $150 of care per day, for only the first three years of care, cost an average of $2,466 per year in 2012 for a couple that starts paying premiums at age 55. Of course $150 of care per day is only $50k/year (well below the cost mathjak has been quoting), and a limitation for the first three years doesn't really even cover the doomsday scenario of needing care for several years. A policy with coverage past three years that covers the actual cost of a more expensive care facility would cost even more than that, and I've read prices for this insurance have gone way up recently.

So it comes down to a question of do I think it's worthwhile to pay thousands of dollars per year to insure myself against the unlikely possibility of needing care that I can probably pay for out of pocket anyway? Perhaps when I get closer to the age where I might need that care I will change my tune, but as of now I'm pretty comfortable with the odds.

the statistics thrown about are way off for a lot of reasons .

the biggest reason is they are based on a generation ago  .  baby boomers are now just retiring  . the fact is this , we have 2x as many people who are living many years longer coming up .  we also had huge cuts in medicaid for homes in 2000  going forward and the budgets were sliced by 1/2 and other options were found for those who needed more than assisted living but less than a snf . while they need long term care they are not in those snf statistics . but that is something you would be paying for if it was you and you were not on medicaid

the reality is there will be loads of folks requiring some kind of long term care . living longer presents a lot of memory illness's too . you can live an awful long time incapacitated   .

think about what insurance is .  , everything you insure for has way way way smaller odds of happening . your house burning down is ridiculously tiny , dying at a young age while raising a family is minuscule in comparison but yet many have life insurance .

the reason is we insure things is  not based on  what the odds are of it happening , we insure the things that if it does happen to us since it has to happen to someone  , the  ramifications of it would be devastating
« Last Edit: August 14, 2016, 01:41:44 PM by mathjak107 »

seattlecyclone

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Re: What do you have planned for longterm care?
« Reply #18 on: August 14, 2016, 02:24:21 PM »
the statistics thrown about are way off for a lot of reasons .

the biggest reason is they are based on a generation ago  .  baby boomers are now just retiring  . the fact is this , we have 2x as many people who are living many years longer coming up

Sure, statistics only show what happened in the past. The default assumption should be that the future will look much like the past. If you want to argue otherwise, you need to provide evidence.

Increased life expectancies could lead to more long-term care needs, but not necessarily. If those extra years tend to be healthy years, it could very well happen that the unhealthy period at the end of life where care would be required would not last any longer on average.

Quote
think about what insurance is .  , everything you insure for has way way way smaller odds of happening . your house burning down is ridiculously tiny , dying at a young age while raising a family is minuscule in comparison but yet many have life insurance .

the reason is we insure things is  not based on  what the odds are of it happening , we insure the things that if it does happen to us since it has to happen to someone  , the  ramifications of it would be devastating

You're of course right about why we have insurance. It's to make sure that if an unlikely event happens, the consequences won't be unacceptably dire. However we're talking about end-of-life care here. What's the worst case? I go to a home that exhausts all my savings over the course of several years while my condition slowly declines. In all likelihood our portfolio at that point will cover a decade of care or more, but if it doesn't there's always Medicaid. I believe Medicaid paid for my grandfather's care (after 2000, by the way), and it seemed like he was well cared for whenever I would visit. That of course would mean I die broke, but that possibility really doesn't bother me enough to be worth paying thousands of dollars per year to insure against.

Then there's the whole issue of the insurance having a limited period of coverage in the first place. Again, I find it hard to envision a scenario where we wouldn't be able to pay out of pocket for at least the first few years of care. The insurance product I would really like to see if I did decide to go for coverage would start paying only after the first few years of care and then have no end date. Does that product exist?

mathjak107

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Re: What do you have planned for longterm care?
« Reply #19 on: August 14, 2016, 02:35:10 PM »
whether to insure or attempt it on your own is up to everyone here that it apply's to.

we all have our reasons why we will do what we do .

Libertea

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Re: What do you have planned for longterm care?
« Reply #20 on: August 14, 2016, 02:50:14 PM »
Libertea:  Can you expand on how you calculated the extra $50,000 for the stash to self-insure?  Am in the same situation and trying to figure out those calculations now so I can plan for the future.
You do the calculation for LTC needs similarly to how you do it for calculating your retirement or educational funding needs.  It is probably most similar to educational funding in that prices are wildly overinflated; people have the option of funding their LTC goal via a lump sum versus with monthly or yearly contributions (most people can't do that for retirement just like most people can't pay cash for a home); and there is a good likelihood that the money will not be needed for this purpose at all.  It is more like retirement funding in that there is no set date the money will be needed (although you have a pretty good idea of when it would be needed); and there are a wide variety of ways to fund LTC, including annuities or whole life insurance as well as LTC insurance and self-insurance, among other possible but less common options. 

Every option has its pros and cons.  I pointed out two of the big cons to LTC insurance, which include high expense (this is not a cheap insurance like term life; this is very costly like DI), and a risk of default by your insurance company given the long time frame you are paying premiums.  (Most people buy LTC insurance in their early 50s but don't use it for 2-3 decades if they do wind up using it at all, which is a lot of years to be paying such high premiums, particularly after retirement.)  A major con of self-insurance that mathjak pointed out is the risk of superannuation (basically outliving your funds), but I would point out that this is a risk we all face regardless with our retirement savings, and it can be mitigated by over-saving for retirement/LTC needs.

Other factors of importance that I mentioned include your health status (now, and anticipated in the future), as well as your age.  Health status is important for obvious reasons: if every relative on both sides of your family has a history of long NH stays, that raises the odds that you will.  Likewise, if you have some kind of progressive, debilitating disease like MS, that raises your risk.  Being female raises your risk since women live longer on average. 

Age is important for the LTC question just like it is for the retirement question, which is why I gave my age: the fact that I'm 41 and not 61 or 21 makes a difference because of how it affects the time available for compounding.  Along these same lines, it matters whether you're contributing a lump sum for LTC (as I am, which will require less money overall) versus funding the amount over time (an annuity).  And if you are funding your LTC over time, will you fund the same amount every year until you contribute the whole amount , or will you increase your yearly funding with inflation (a growing annuity)?  The longer the time frame over which you spread your payments, the more payments you will have to make, and the less help you will get from the growth of your money over time.

Now, here is how to do the Time Value of Money (TVM) calculation.  You can do these steps for retirement or education funding as well, but the basic steps are the following:

Step 1: Set a timeline.  In my case, as a 41-year-old, I conservatively likely have ~ 30 years until I would be likely to need LTC.  If you are younger or older than I am, adjust your timeline accordingly.

Step 1a: Determine TVM variables.  If you are not familiar with terms like present value, future value, payments, periods, and interest rates, you need to learn about these things before you can do the calculations.  You will also need a financial calculator, of which there are several free ones online that you can find by googling.  But they're cheap to buy also.  Stop here if you don't know about TVM and learn about this first.  Your calculations will only be as good as your assumptions for timeframe, inflation rates, interest rates, and current costs of LTC.  (You should look up the current cost of the LTC you are trying to fund, whether it is NH or ALF care.)

Step 2: Once you know your costs, you can determine your gross dollar needs.  If you want to get fancy, you can reduce this amount by SS, pensions, or other guaranteed funding that you will have.  Or just leave it as a gross value to build in additional conservatism.

Step 3: Calculate the inflated amount (future value) for what your current LTC costs would be in the future (say, in three decades if you're around age 40 like me).

Step 4: Calculate the capital you need at that age, including with payments over the amount of time you wish to fund in the NH or ALF (commonly three years is used).  Make sure to use the inflation-adjusted earnings rate.  This is similar to how one determines college funding.

Step 5: Finally, you have to discount the capital need in the future to its present value so you can determine how much you need to contribute now (either as a lump sum or as an "annuity" of payments over time) to fund the full amount.

If you've never done these calculations before, you can hire a CFP to help you.  If you do decide to get help, go with a fee-only planner - you may not need someone to manage your portfolio for you and otherwise perform other financial planning services.

Sorry if this is confusing, but I hope it at least gives an idea of how the process works.
« Last Edit: August 14, 2016, 03:05:28 PM by Libertea »

mathjak107

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Re: What do you have planned for longterm care?
« Reply #21 on: August 14, 2016, 02:54:41 PM »
in our case we really couldn't care less about the the 3 years insurance coverage at all . we wanted the perks after the insurance runs out .

to have no look back , no spending down needed ,no income limitations for the stay at home spouse and no irrevocable trusts needed  and just have a special form of medicaid pick up any bills forever is priceless .

but that is what our state , ny , offers on their total asset partnership plans .

Libertea

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Re: What do you have planned for longterm care?
« Reply #22 on: August 14, 2016, 03:13:58 PM »
The insurance product I would really like to see if I did decide to go for coverage would start paying only after the first few years of care and then have no end date. Does that product exist?
Not that I'm aware of.  And even if it did exist, it would be prohibitively expensive.  As noted above, most LTC plans either limit you to three years of care, or they cap you at some total amount of costs over a longer time. 

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Re: What do you have planned for longterm care?
« Reply #23 on: August 14, 2016, 03:28:47 PM »
The insurance product I would really like to see if I did decide to go for coverage would start paying only after the first few years of care and then have no end date. Does that product exist?
Not that I'm aware of.  And even if it did exist, it would be prohibitively expensive.  As noted above, most LTC plans either limit you to three years of care, or they cap you at some total amount of costs over a longer time. 

This part doesn't really make sense to me. Sure, people who spend a decade on long-term care exist, and they're exceedingly expensive, but they're also exceedingly rare. The cost of insurance depends on the likelihood of an event multiplied by the cost of that event. Based on the graph showing the distribution of care needs by length from the paper I linked earlier, I have a hard time believing that (cost of first three years of care) * (number of people who need any long-term care) is anywhere near as much as (cost of care after three years) * (number of people who need more than three years of care).

Libertea

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Re: What do you have planned for longterm care?
« Reply #24 on: August 14, 2016, 03:32:44 PM »
in our case we really couldn't care less about the the 3 years insurance coverage at all . we wanted the perks after the insurance runs out .

to have no look back , no spending down needed ,no income limitations for the stay at home spouse and no irrevocable trusts needed  and just have a special form of medicaid pick up any bills forever is priceless .

but that is what our state , ny , offers on their total asset partnership plans .
But again, these "benefits" are all related to preserving one's assets.  As such, they aren't relevant for the single, childfree person who doesn't care about leaving a bequest for beneficiaries.  In my case, I don't even own a house, so I really could liquidate my entire portfolio and spend down every dollar I have if that were necessary.

I think people on financial forums get a skewed view of what is necessary and possible during retirement.  There were about 8 million people insured for LTC in 2012 in a country of nearly 400 million.  The average low-income retiree living in their modest home or trailer home is ALREADY self-insuring for LTC by default, because that's the only affordable option available to them.  This concern about preserving assets in the face of needing LTC is truly a first world problem we're discussing here.

Libertea

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Re: What do you have planned for longterm care?
« Reply #25 on: August 14, 2016, 03:39:08 PM »
The insurance product I would really like to see if I did decide to go for coverage would start paying only after the first few years of care and then have no end date. Does that product exist?
Not that I'm aware of.  And even if it did exist, it would be prohibitively expensive.  As noted above, most LTC plans either limit you to three years of care, or they cap you at some total amount of costs over a longer time. 
This part doesn't really make sense to me. Sure, people who spend a decade on long-term care exist, and they're exceedingly expensive, but they're also exceedingly rare. The cost of insurance depends on the likelihood of an event multiplied by the cost of that event. Based on the graph showing the distribution of care needs by length from the paper I linked earlier, I have a hard time believing that (cost of first three years of care) * (number of people who need any long-term care) is anywhere near as much as (cost of care after three years) * (number of people who need more than three years of care).
I'm not an actuary, and I haven't run the numbers.  But start looking at prices for even three year limited time frame LTC insurance policies, and you will see what I'm talking about when I say they are very expensive. 

This is my own thought and I have no evidence for it, but the high cost may at least in part be because the pool of LTC insured is relatively small.  As I mentioned above, most people (the vast majority) do NOT buy LTC insurance.  Of those who do, there is a tendency for people with pre-existing health issues to disproportionately want to buy the insurance, thereby skewing the baseline use rate.  It's not too different than how young and healthy people tend to not want to buy health insurance, and then insurance companies are left with a pool of sicker people and relatively few healthy ones to keep costs low.

mathjak107

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Re: What do you have planned for longterm care?
« Reply #26 on: August 14, 2016, 03:54:14 PM »
in our case we really couldn't care less about the the 3 years insurance coverage at all . we wanted the perks after the insurance runs out .

to have no look back , no spending down needed ,no income limitations for the stay at home spouse and no irrevocable trusts needed  and just have a special form of medicaid pick up any bills forever is priceless .

but that is what our state , ny , offers on their total asset partnership plans .
But again, these "benefits" are all related to preserving one's assets.  As such, they aren't relevant for the single, childfree person who doesn't care about leaving a bequest for beneficiaries.  In my case, I don't even own a house, so I really could liquidate my entire portfolio and spend down every dollar I have if that were necessary.

I think people on financial forums get a skewed view of what is necessary and possible during retirement.  There were about 8 million people insured for LTC in 2012 in a country of nearly 400 million.  The average low-income retiree living in their modest home or trailer home is ALREADY self-insuring for LTC by default, because that's the only affordable option available to them.  This concern about preserving assets in the face of needing LTC is truly a first world problem we're discussing here.

the beauty of these and other forums is the flow of information and ideas . not everything apply's to everyone .but general informative is not for just the op but for those it apply's too as well reading these threads .

if every comment only applied to the op most of us could stop reading immediately  as soon as the op was not in the same situation we were .

Libertea

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Re: What do you have planned for longterm care?
« Reply #27 on: August 14, 2016, 04:06:29 PM »
the beauty of these and other forums is the flow of information and ideas . not everything apply's to everyone .but general informative is not for just the op but for those it apply's too as well reading these threads .

if every comment only applied to the op most of us could stop reading immediately  as soon as the op was not in the same situation we were .
That's exactly what I do.  I have neither the time nor the inclination to read every post of every thread on this forum.  If I skim the first few posts of a thread and decide it isn't applicable or interesting to me, I happily move on to the next thread.  That category definitely include threads with info pertaining only to married people, since I am not married. ;-)

Life in Balance

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Re: What do you have planned for longterm care?
« Reply #28 on: August 14, 2016, 04:22:38 PM »
Thanks, Libertea, for that detailed reply.  That is very helpful. 

mathjak107

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Re: What do you have planned for longterm care?
« Reply #29 on: August 14, 2016, 04:23:15 PM »
but if you notice the reply's above ,  about ltc , are general comments that others have made  about their own feelings about the pros and cons in their own situations not the op's ,.

iris lily

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Re: What do you have planned for longterm care?
« Reply #30 on: August 14, 2016, 06:30:03 PM »
In order to cover 7 years of nursing home care @ $100,000 annually i will use:

$50,000 my annual income from 3 sources
$50,000 annual draw down from our stash

That leaves DH to live on:

$22,000 Soc Security pension
$1.4 million to draw from, he can use cash or perhaps it will generate enough for him to live on

He can also work a bit part time, he is always in demand. He can also cosy up to a girlfriend and pool resources with her.

It is far more likely that i will go into a nursing home than he will while we are both alive. And I doubt that I would last 7 years, but even if I lasted longer, there is money to pay for it.  And at the moment decent nursing homes are about $80,000-$85,000 in my region, so there is money saved there from my projection.


« Last Edit: August 14, 2016, 06:58:18 PM by iris lily »

mathjak107

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Re: What do you have planned for longterm care?
« Reply #31 on: August 15, 2016, 01:35:53 AM »
the reality is most of us will not likely need a snf . more than likely we will need assisted living or home care .

GuitarStv

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Re: What do you have planned for longterm care?
« Reply #32 on: August 15, 2016, 09:46:03 AM »
Honestly, I'm hoping that someone in my family will respect my wishes and help me commit suicide when I'm too old and weak to look after myself.  I've spent some time with relatives who have dementia in old age homes, and they are effectively already dead.

iris lily

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Re: What do you have planned for longterm care?
« Reply #33 on: August 15, 2016, 09:49:32 AM »
the reality is most of us will not likely need a snf . more than likely we will need assisted living or home care .
Assisted living aprtments can be pretty inexpensive. My friend's dad paid less than $40,000 annually for a two,room unit and that included all meals. I wanted to move in.

mathjak107

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Re: What do you have planned for longterm care?
« Reply #34 on: August 15, 2016, 12:30:40 PM »
it all depends where and at what level you want . here in ny they are pretty pricey

Lyssa

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Re: What do you have planned for longterm care?
« Reply #35 on: August 15, 2016, 01:03:40 PM »
Honestly, I'm hoping that someone in my family will respect my wishes and help me commit suicide when I'm too old and weak to look after myself.  I've spent some time with relatives who have dementia in old age homes, and they are effectively already dead.

+1

I'll include everybody in my will who would arrange a trip to Switzerland should I no longer be able ro do that for myself.

I've seen dementia unfold with inhome care, I've seen it in nursing homes and I will not let it happen to me.

mathjak107

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Re: What do you have planned for longterm care?
« Reply #36 on: August 15, 2016, 02:47:23 PM »
as long as it is my mind that goes first , i can deal with that   ha ha ha   

Reynold

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Re: What do you have planned for longterm care?
« Reply #37 on: August 15, 2016, 04:05:23 PM »
This is my own thought and I have no evidence for it, but the high cost may at least in part be because the pool of LTC insured is relatively small.  As I mentioned above, most people (the vast majority) do NOT buy LTC insurance.  Of those who do, there is a tendency for people with pre-existing health issues to disproportionately want to buy the insurance, thereby skewing the baseline use rate.  It's not too different than how young and healthy people tend to not want to buy health insurance, and then insurance companies are left with a pool of sicker people and relatively few healthy ones to keep costs low.

I read a recent Wall Street Journal article that discussed why the insurance companies who had been selling LTC polices were losing a lot of money, and either (1) raising rates on them (this happened to my aunt, she had to cut coverage to afford the premiums) and/or getting out of the business.  There were several factors, one is that more people kept the policies than they expected from life insurance experience.  Apparently a lot of people would buy life insurance, pay for awhile, and let it drop before it got used, so the insurance company got those extra premiums without having to pay out.  That didn't happen nearly as much with LTC policies.  Another factor was that outlays were much higher than they projected, based on older data (perhaps like the study cited earlier?) not many people needed expensive care for long periods, most died pretty soon after needing much assisted living, let alone nursing home care.  Now they have found a much bigger percentage than they expected needing expensive memory care, but still living for a decade or more because physically they are fine.  Finally, if I remember correctly, older figures the insurance companies used to set rates didn't really measure the number of people who were taken care of by family members, which is a bit more rare these days with small and dispersed families, more people go into care they have to pay for. 

Regarding people with poor health buying the LTC, the companies have tightened up their medical screening a lot, from what a couple of agents we talked to recently told us, around 50% of people can't get LTC insurance at all.  Also if one company rejects you, they share info on that with others, so you are uninsurable. 

We have priced LTC insurance, and it was hard to convince ourselves that what it costs was worth it for a lousy $2-300k coverage.  Plus it locks you into using registered agencies for in-home care, etc., versus the flexibility to, for example, just hire a cleaning service when you can't clean your home any more.  What we were considering instead was deferred fixed payout annuities, say 20-25 years out to start paying, since that would provide some "insurance" for LTC expenses, which are most likely to be when we are older, as well as some protection from a 10 year stretch of poor market returns right after FIRE.  If markets do well the first decade of retirement, we won't miss the money we put into that, if they do badly the first decade, we have unloaded some of that risk onto an insurance company.  If we are buying insurance, we want to actually transfer that risk, so didn't want variable index annuities. 

Northwestie

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Re: What do you have planned for longterm care?
« Reply #38 on: August 15, 2016, 04:20:26 PM »
Good comments, thank you.   We looked at LTI costs and the benefits and came to a similar conclusion.

Cassie

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Re: What do you have planned for longterm care?
« Reply #39 on: August 15, 2016, 04:44:45 PM »
there is a law to protect spouses from becoming impoverished if one goes into a nursing home.  I had 2 Grandmas. One had $ and one did not. They both ended up in the same nice nursing home. Medicaid paid for the poor one.  Also usually the healthy spouse can keep the ill one home for awhile reducing the need for care. A friend in Texas said her Dad hired an elder care attorney to protect his assets.  I was shocked at how much of his $ he was allowed to keep when his wife had to go into a home.  Also sometimes you can find a nice home in  a small town that is a short distance from where you live.  I had to put a good friend with Alzheimer's in a home and found one an hour from me for half the price and quite nice.  Her SS and small pension cover it at 1900/month.

iris lily

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Re: What do you have planned for longterm care?
« Reply #40 on: August 15, 2016, 04:48:31 PM »
there is a law to protect spouses from becoming impoverished if one goes into a nursing home.  I had 2 Grandmas. One had $ and one did not. They both ended up in the same nice nursing home. Medicaid paid for the poor one.  Also usually the healthy spouse can keep the ill one home for awhile reducing the need for care. A friend in Texas said her Dad hired an elder care attorney to protect his assets.  I was shocked at how much of his $ he was allowed to keep when his wife had to go into a home.  Also sometimes you can find a nice home in  a small town that is a short distance from where you live.  I had to put a good friend with Alzheimer's in a home and found one an hour from me for half the price and quite nice.  Her SS and small pension cover it at 1900/month.

I poked around a few years ago, and from what I read, DH could keep $80,000 and his house. That amount may jave been raised snce then.  Now, he does  have IRA's in his name only, so I am not sure that wouod be required to go to my nursing home payments. But I guarantee he wouldn't be able to protect a couple of million $  Legally, anyway.

mathjak107

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Re: What do you have planned for longterm care?
« Reply #41 on: August 15, 2016, 04:57:35 PM »
there is a law to protect spouses from becoming impoverished if one goes into a nursing home.  I had 2 Grandmas. One had $ and one did not. They both ended up in the same nice nursing home. Medicaid paid for the poor one.  Also usually the healthy spouse can keep the ill one home for awhile reducing the need for care. A friend in Texas said her Dad hired an elder care attorney to protect his assets.  I was shocked at how much of his $ he was allowed to keep when his wife had to go into a home.  Also sometimes you can find a nice home in  a small town that is a short distance from where you live.  I had to put a good friend with Alzheimer's in a home and found one an hour from me for half the price and quite nice.  Her SS and small pension cover it at 1900/month.

you need to see the figures for your own state . here in ny what they allow my wife as income a month would not even pay our rent and let her eat .

as far as assets the amount is pretty little when you are talking about the level of assets that folks have who are interested in protecting them .

a home is a protected asset in most states but many folks screw this up by putting the home in a living revocable trust  to avoid probate

at best a good estate attorney can manipulate loans at the last minute to save about 1/2 the liquid assets .

while preserving assets is one thing , preserving income for the stay at home spouse is another story . regular medicaid has caps that can be quite low depending on  where you live .  .



« Last Edit: August 15, 2016, 05:04:49 PM by mathjak107 »

Cassie

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Re: What do you have planned for longterm care?
« Reply #42 on: August 15, 2016, 05:25:37 PM »
I am not sure how the lawyer did it but my friend in TX's father saved a big bundle of his $ and he left an inheritance to his kids. This actually really didn't seem right to me.  also if you have a high enough disability rating and are a veteran you can go into a VA home for free.  The one by us is really nice.

Exhale

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Re: What do you have planned for longterm care?
« Reply #43 on: August 15, 2016, 07:53:31 PM »
Thank you to everyone for taking the time to share general information and also a bit about your own decisions on this topic. It's given me lots of questions and ideas to research and think about - many of which I hadn't even considered. Again, thank you!

Laura Ingalls

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Re: What do you have planned for longterm care?
« Reply #44 on: August 16, 2016, 06:21:03 AM »
I actually had LTC insurance in my 30s as a employer paid benefit.  Currently my plan for dh and I is to do nothing til we need ltc and then buy a SPIA for the spouse that does not need care.  This is perfectly ok in the current rules and would only be done if we were running a deficit in monthly spending. 

SachaFiscal

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Re: What do you have planned for longterm care?
« Reply #45 on: August 16, 2016, 09:06:51 AM »
What if you got divorced right before you or your spouse had to go into a nursing home, then the one in the nursing home would only have to exhaust half of the resources before gettin Medicaid and the still healthy spouse would not go broke. Is that a possibility?

Fishindude

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Re: What do you have planned for longterm care?
« Reply #46 on: August 16, 2016, 09:10:22 AM »
I have absolutely zero plans in this area, just a good sized stache and hoping for the best.
I do intend to learn more about this subject in the next several years.

mathjak107

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Re: What do you have planned for longterm care?
« Reply #47 on: August 16, 2016, 10:17:28 AM »
What if you got divorced right before you or your spouse had to go into a nursing home, then the one in the nursing home would only have to exhaust half of the resources before gettin Medicaid and the still healthy spouse would not go broke. Is that a possibility?

be very careful playing this game .

it isn't easy to get what is called a medicaid divorce in many states which is usually what is done when a major health event happens .



two very powerful laws here in ny have been upheld and according to our estate attorney who is one of the biggest in ny there are very very few medicaid divorces .

all court actions are now pretty much based on right of refusal .

our two laws that pretty much killed off medicaid divorce are :

(1) Section 5-311 of the General Obligation Law which provides that except as provided in Section 236 of the Domestic Relations Law, a husband and wife cannot contract to relieve either his or her liability to support the other in such a manner that he or she will become incapable of self support, and therefore likely to become a public charge; and

(2) Family Court Act Section 415 which provides that the spouse or parent of a recipient of public assistance or care, or of a person liable to become in need thereof, or a patient in an institution in the department of mental hygiene if of sufficient ability, is responsible for the support of such a person. The Court has the discretion to require any such person to contribute a fair and reasonable sum for such support (child up to 21 years of age).

also if it is eventually determined that a divorce is to be pursued, the divorce needs to satisfy all of the requirements of the Domestic Relations Law, such as establishing one of the requisite grounds for a divorce. This may be difficult to accomplish because of the illness or disability of one spouse

BFGirl

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Re: What do you have planned for longterm care?
« Reply #48 on: August 16, 2016, 11:21:19 AM »
I have to admit that one of my biggest concerns about ever getting married again is because of the financial hit that a spouse who doesn't need long term care takes if the other spouse needs nursing home care.  In some cases, it works out okay, but usually not if the couple has significant assets, unless they did some planning at least 5 years out which is the period for which Medicaid looks back at financial transactions.

mathjak107

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Re: What do you have planned for longterm care?
« Reply #49 on: August 16, 2016, 12:04:46 PM »
my father remarried late in life . the 6 years he spent in a home was devastating to his wife , if i seem overly concerned about this stuff it is because i saw how meaningless statics can be . crap either happens to us or it doesn't .
« Last Edit: August 16, 2016, 12:06:23 PM by mathjak107 »

 

Wow, a phone plan for fifteen bucks!