LTC Insurance question

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My wife and I are both 50 years old and our investment advisor is recomending long term care insurance. I am being treated for high blood pressure and high cholesterol. My wife is not taking any meds. He says that rates are going up 40% in a few weeks (mass Mutual). Three year for me and 5 year for my wife will cost us close to $300 per month. At our income that means we will save that much less a month for retirement. What should we do?

[brewer12345]

Depends. Can you afford to self-insure?

FWIW, LTC insurance is in its infancy and the product is still evolving. Many insurers have either left that market or drastically changed their product and pricing. Since insurers view this as a risky business to be in, they charge a lot for it. As a result, if you can afford to self-insure it makes alot of sense to do so.

MassMutual is an excellent company, but they are not a big player in LTC. You might be better off getting quotes from other companies in this business, especially John Hancock and Genworth. Be careful not to deal with any company offering this product that is rated less than Aa3/AA-. You want a very financially strong backer for this risk.

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We have about 500k in retirement accounts now. In 4 years my wife will be fully vested in her pension adding an additional 300k. We are maxing out on her 401k including after 50 money. I have a simple IRA currently putting in about 8k per year. We also have been contributing to roth iras to the maximum and hope to continue. We look to retire at 58-60. I could not self insure at this time.

[brewer12345]

You are borderline right now, but you are also highly unlikely to end up needing LTC. I am SWAGging you to be at something like $1.5 million of assets by 58, assuming you max everything out and earn 8% annually. I suspect that you can afford to wait a few years before buying LTC insurance, and you may get a better idea of what your situation is like at that point. LTC insurance pricing is very sensitive to long term interest rates, which are extremely low right now. If rates go up, pricing should moderate, assuming you actually want to buy this stuff.

[P.S.]

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Do you have kids? Think that was a pivotal reason for my parents.

(Hope this is not too presumptuous) But what about optimizing your chances of never needing LTC? Three of the five major risk factors for stroke/heat attacks/etc problems are being male over 50, high blood pressure, high chol/lipids. (Hopefully you don't smoke...expensive hobby anyways). You could see your doctor and and present him with this scenario: I'm considering LTCI. Can you help me to figure out what I can do so that I will never need to use it? Daily exercise is a lot of work (especially alot more than mailing in a monthly LTCI check) but cheaper in the long run.

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Thank you Brewer and P.S..

We thought it over last night and decided against it for now. We figure that there are no guarantees in life.

I do exercise (treadmill) daily, my weight has come down 20lbs since I have started a program. I take plenty of fish oil and multi-vitamins and an aspirin a day. We also enjoy red wine several times a week. Smoke 2-3 cigars a week. Hope to cut that out soon. I also am borderline diabetic.

I think we will re-address this issue when we turn 59.

I just went through the nursing home scenerio with my mother and what I learned was that the daily amount $120 per day (in her case) just began to cover the expenses. This is what LTC covers. Where the expenses can get out of control is on medications, which are aggressively prescribed by nursing home doctors and supplies. These can double or triple the daily charge. This is where you can lose control and the bills become astronomical. At least the daily rate is capped. It's the other charges that burn through your money!

[Brat]

Where did you find that deal?? My mom's bill is $200/day (plus meds, supplies and salon) in Portland, OR and she isn't bedridden!

Those are the rates in the Dallas area. They range from about $115-125 per day before all of the other charges.It is less expensive here then other areas, possibly because there are a lot of skilled nursing facilities and they are not at capacity.