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Old 06-15-2009, 02:25 PM   #21
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It looks to me like OP Travel4Fun is asking how much $ to set aside to self-insure against LTC, less the 30 percent the other assets would provide, and would not touch this amount except for LTC.

From what REWahoo has posted (and this is also true of my MIL's LTC policy), a LTC policy might cover $150/day and be in force for 3 years. You could multiply those out for a starting point, in simple math, of $165,000. As a lump sum set aside earlier, you would hope that it would grow, too. (Of course, OP's house worth $400,000 could also be seen at his/her LTC self-insurance fund, so no separate pile of $$ would be necessary.)

So for a ballpark match to what an LTC policy would pay, lock up $165,000.
You might also deduct the amount you would be spending on living expenses besides housing, including food, housing expenses and insurance, etc. since you'd be spending that if you were not confined to a NH.

Even if the NH costs $85K per year, about the same as a very comfortable retirement might cost in the community, the actual additional expense of living in a NH are what you really need to self-insure, since presumably you had planned for routine expenses anyway. Figure high at $30K per year above otherwise planned-for expenses. For a three year final chapter in a NH you are set back under $100K over your planned-for costs, all in. Many here could manage that.

The real tragedy financially is the poor (and very rare) sould who enters the NH and lives for 10 or 20 years beyond. Medicaid for almost all in that situation.
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Old 06-15-2009, 02:32 PM   #22
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You might also deduct the amount you would be spending on living expenses besides housing, including food, housing expenses and insurance, etc. since you'd be spending that if you were not confined to a NH.

Even if the NH costs $85K per year, about the same as a very comfortable retirement might cost in the community, the actual additional expense of living in a NH are what you really need to self-insure, since presumably you had planned for routine expenses anyway. Figure high at $30K per year above otherwise planned-for expenses. For a three year final chapter in a NH you are set back under $100K over your planned-for costs, all in. Many here could manage that.
Rich, I can see this being the case for a single person but not if one spouse were in a NH. Wouldn't the healthy(er) spouse have only slightly diminished expenses (food for one not two, etc.), thus the cost of the NH be almost entirely an added cost?
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Old 06-15-2009, 02:35 PM   #23
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True, Rich, re having some expenses go down if one goes into a nursing home, but I was just coming up with a ballpark amount that might come close to what an insurance policy would pay out, not based on expenses or anything else, just what a policy would pay.
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Old 06-15-2009, 02:44 PM   #24
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DW and I have had LTC policies for 9 years. The ins company knows exactly what their maximum liability is on each of us - the policy covers up to three years of care limited to a maximum of $100 per day increasing at 5% per year (now at $155/day). Escalating rates and increases in the cost of care do not impact the cost to the insuance company, so I don't expect a huge increase in rates once our 10 year guarantee of premium expires next May.

Unfortunately, I could be wrong.
You're right about the limitations of the policies' maximum liability per year. Oops. Then the policy owners just have to self-insure for the rest.

Still, our federal LTC policy premiums increased by a staggering amount just in one year, this year. Even worse, the wording on the policies was such that from what I can tell, the majority of those with these policies felt like they were sucker-punched.

This article explains more about it. There were a multitude of questionable reasons including possibly bad underwriting, bad lapse rate assumptions, and more.

"Why Long Term Care Premiums are Increasing"

Why long-term care premiums are rising - Federal news, government operations, agency management, pay & benefits - FederalTimes.com

It sure is a dilemma.
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Old 06-15-2009, 03:17 PM   #25
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Rich, I can see this being the case for a single person but not if one spouse were in a NH. Wouldn't the healthy(er) spouse have only slightly diminished expenses (food for one not two, etc.), thus the cost of the NH be almost entirely an added cost?
Sure, unless the healthy spouse downsized, which would both free up equity as well as reduce expenses. They might also sell a car if they had two.

I guess every couple would have to do the math, but NH expenses are not necessarily completely additive to prior expenses. In some cases, prior home care costs can also be eliminated. For planning purposes as described in the OP it may be reasonable to self-insure a smaller number than the actual NH costs. It is also a common time for the noninstitutionalized elderly to move in with kids, if that is how the family wants it (a lot easy to take in Gramma than both Gramma and Grampa).

Tough call. remain as confused as ever about LTC insurance. I'll wait and reassess after health care reform sinks or swims.
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Old 06-15-2009, 03:20 PM   #26
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Still, our federal LTC policy premiums increased by a staggering amount just in one year, this year. Even worse, the wording on the policies was such that from what I can tell, the majority of those with these policies felt like they were sucker-punched.
This is another reason why many people don't trust LTCI. One of the selling points the insurers make is to "lock in low rates while you're young." Yet those rates really aren't locked in (other than that they can only raise rates on the entire group and can't ding you for developing health conditions). My mom (age 74, generally healthy) tells me her LTCI is going up more than 35% in two steps over the next year (20% last month and another 15% a year later). With that kind of surprise it's hard to use these policies as a real form of risk management, because you could pay the premiums dutifully for 20 years and find yourself "priced out" of keeping it when you're likely to need it most -- when you're older.

Sounds a bit like the health insurance quagmire, actually...
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Old 06-15-2009, 03:21 PM   #27
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Tough call. remain as confused as ever about LTC insurance.
I agree it's a crapshoot. Since I have it no doubt it will turn out to be a mistake.
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Old 06-15-2009, 04:12 PM   #28
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Tough call. remain as confused as ever about LTC insurance.
Me too. If LTCI was as straight forward as, say, term life insurance I'd probably buy as long as premiums were under 10% of our current budget. Self-insuring, if you actually make an effort to plan for the spouse who is the financial leader of the band to be out of commission and large bills need to be paid for a looooong time, is a true pita. My portfolio is more conservative and liquid now that it would be if we had LTCI. But, I haven't found LTCI I trust so far. So a chunk of my portfolio is easily harvestible by DW if the need arises.
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Old 06-15-2009, 04:23 PM   #29
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I obviously wasn't clear in my question. Emergency fund has strong connotations.

Let me ask two different questions, which may be more straight-forward and can help get to the same answer:
  1. How many years of self-insured LTC do you/will you/would you have provisions for? (Note -- in my case, I am self-insuring from a separate fund primarily for this purpose--assume no impact to other pots of money)
I wouldn't have any separate "pool" of assets for LTC self-insure. I think you want to have 2 years worth of "private pay" assets available.

When I was looking for potential nursing home for my mother (fortunately never needed) after illness, many homes did not take Medicaid people directly (or avoided taking).

But if you had 2 years worth of assets as private pay ($120K or so) -- they wanted to talk with you and would guarantee you'd stay there if you ran out of assets and went to Medicaid.

Private pay customers are more valuable - and they probably know that average LTC situations are inside of 2-3 years.
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Old 06-15-2009, 04:28 PM   #30
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My mom (age 74, generally healthy) tells me her LTCI is going up more than 35% in two steps over the next year (20% last month and another 15% a year later). With that kind of surprise it's hard to use these policies as a real form of risk management, because you could pay the premiums dutifully for 20 years and find yourself "priced out" of keeping it when you're likely to need it most -- when you're older.
I've mentioned this before, but DW and I have discussed what we will do if our LTCI premiums get too steep. We plan to cancel the policy on her and keep only mine in place. Our thinking is I can probably live more comfortably on less money than she - since I'm apparently related to Unclemick.
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Old 06-15-2009, 04:33 PM   #31
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I guess every couple would have to do the math, but NH expenses are not necessarily completely additive to prior expenses.
True Rich. In our case, 61 yrs old, I assume a 20% reduction in non NH household expenses for the first two years if one of us is suddenly struck down and placed in LTC. So I'm self-insured for 80% of current expenses plus NH for two years. After that, I assume downsizing, selling a car, etc. in order to remain private pay (and solvent) for several more years after that.

If NH care needs arise later in life, say our 80's, I'm not as concerned. It's now, our early 60's, when my fear of DW being near-broke and going on for many years makes me investigate annunities (ugh), LTCI, trusts, and blaaaah, blaaah, blaaah.

I sure wish the choices could be more straight forward.
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Old 06-15-2009, 04:39 PM   #32
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But if you had 2 years worth of assets as private pay ($120K or so) -- they wanted to talk with you and would guarantee you'd stay there if you ran out of assets and went to Medicaid.
I think the real issue is, for couples, even if you construct your portfolio to have 2 yrs of LTC easily available, you might need more than two years and will have to liquididate as necessary to pay. Medicaid doesn't care what investments you're in. They want you to pay until you're near-broke. At least that is how it is in Illinois.
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Old 06-15-2009, 04:58 PM   #33
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I've mentioned this before, but DW and I have discussed what we will do if our LTCI premiums get too steep. We plan to cancel the policy on her and keep only mine in place. Our thinking is I can probably live more comfortably on less money than she - since I'm apparently related to Unclemick. [
I 'd drop the policy on you since most women outlive men and she would be alive if you needed some care . Like Rich I think it is questionable whether it's a smart insurance and so far I am self insuring and being real nice to my daughter .
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Old 06-15-2009, 05:09 PM   #34
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I 'd drop the policy on you since most women outlive men and she would be alive if you needed some care .
Yes, she would. But she would be spending down her (our) assets to fund my care. That could leave her with LTCI coverage but no money to live on. Not something I want to see happen.

Much better to my way of thinking if we have LTCI coverage on me in order to leave her a nest egg after I'm gone - whether it be for her routine living expenses or for her own long term care.
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Old 06-15-2009, 05:46 PM   #35
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I agree it's a crapshoot. Since I have it no doubt it will turn out to be a mistake.
If you're gonna bail, the sooner the better...
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Old 06-15-2009, 05:55 PM   #36
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Our guarantee of premium expires next May and the amount of increase we're hit with could influence our decision on whether to pull the plug on one policy. The premium is currently only $580 for each of us, so it isn't a major hit to the budget - yet.
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Old 06-15-2009, 06:46 PM   #37
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We bought a CALPERS (California state employee) LTC policy in 1998 in contemplation of early retirement. Premiums then were $1,200 a year for my wife and myself ($135/day indexed to inflation). Premiums have now increased by 47% after I decided to try to keep our original coverage. CALPERS has a "cute" feature whereby they say they will never increase the premiums. Catch is they reduce the coverage. What I've decided to do going forward is keep my premiums level and just opt for the reduced coverage and self insure for the balance and hope for the best. Maybe I'll have to check out nursing homes in Mexico or Costa Rica?
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Old 06-15-2009, 06:49 PM   #38
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Our guarantee of premium expires next May and the amount of increase we're hit with could influence our decision on whether to pull the plug on one policy. The premium is currently only $580 for each of us, so it isn't a major hit to the budget - yet.
Yes, at that low cost it's worth waiting to see what they do. Was the guarantee of premium for a specific period of time? Or attained age?
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Old 06-15-2009, 06:50 PM   #39
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Wow, lots of discussion. Sounds like many of you are as uncertain as I am.

The good news is that the numbers that have been thrown out so far are in line with what I've been thinking, which is $150-250k. That would probably cover the extra cost for at least 3-5 years of care. The house could be used after that. If it is ten years, we're probably in trouble, but worrying too much about the very worst case would mean never retiring.

A minor additional clarification, not critical at this point, but since our pensions and current SS estimates should cover about 120% of planned expenses by the time I hit 65, our long-term retirement investments would only be for this purpose. Call it what you want, but the kids get it someday unless we need it for a budget buster like LTC.

Thanks for the comments. I'm feeling a little more comfortable now.
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Old 06-15-2009, 06:54 PM   #40
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Yes, at that low cost it's worth waiting to see what they do. Was the guarantee of premium for a specific period of time? Or attained age?
10 years.
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