What is Considered LTC Self-insure Safe Level?

[mexexpat]

Our plan:
We purchased a large home, single story with pool and a separate casita in Central Mexico (have owned homes here since 2008). The MBA has a separate shower that would accommodate a wheelchair easily.

Should we need care, we will stay in main house and hire caregivers to assist us. Many expats here have done and are doing just that. Caregivers cost is 50 to 60 pesos an hour. Most elderly start off with 8 hours a day, adding hours as needed.

If you need round the clock care, and offer free housing (in the casita), you can retain a couple for 4,000 pesos a month. Current exchange rate is 19.60 pesos = 1 USD.

 

[youbet]

One caveat although the people on this Board are probably sharp enough to avoid this pitfall. I saw a really sad story about a woman thrown out of her house because her husband had gone into LTC. They'd taken out a reverse mortgage and because she was younger, they could get more $$$ of her name wasn't on it. So- when he entered LTC the reverse mortgage became due.

You'd also need to make sure that the spouse at home has the resources to maintain it, pay property taxes, etc. Reverse mortgage companies want to protect their interests (don't blame them for that) and I think they can actually terminate the agreement if you let the house fall apart or stop paying property taxes.

Excellent points athena53!

We used a reverse mortgage on MIL's condo very successfully to help her in her final years. But we worked hard to understand what we were getting into, followed the rules meticulously and documented everything. MIL used a few reverse mortgage bux a week to supplement her SS for routine living expenses while she still lived in the condo. When she needed to move to a NH for health reasons, we cashed her out of the balance (a very favorable move since the condo value had dropped significantly since the reverse mortgage appraisal) and used that to pay for the first 1.5 years of her nursing home stay. Since she was private pay for that time (and we were diligent shoppers) we were able to find her a bed in a top tier place which was willing to guarantee she could stay on Medicaid once she ran out of private funds. She was there a total of about 4 years. (There were NO Medicaid clients at that facility who did not begin their stay as private pay and transition to Medicaid when they ran out of resources.)

In our situation, there was no at-home spouse adding complications since FIL had passed long before. But doing things right and monitoring the details were still key in assuring MIL was in a top notch facility without me having to pay for it. And the reverse mortgage really helped in that regard. Reverse mortgages are not appropriate for all circumstances however.

 

[youbet]

Our plan:
We purchased a large home, single story with pool and a separate casita in Central Mexico (have owned homes here since 2008).

Should we need care, we will stay in main house and hire caregivers to assist us. Many expats here have done and are doing just that. Caregivers cost is 50 to 60 pesos an hour. Most elderly start off with 8 hours a day, adding hours as needed.

If you need round the clock care, and offer free housing (in the casita), you can retain a couple for 4,000 pesos a month. Current exchange rate is 19.60 pesos = 1 USD.

What's your plan if you need daily medical care beyond the capability of the 4,000 peso a month live-in caregivers? Or, are you saying that you can hire folks for that amount that are qualified to do injections, IV's, therapies, etc. ?

 

[REWahoo]

Should we need care, we will stay in main house and hire caregivers to assist us.

Since the probability of declining cognition increases with advanced age, how do you plan to manage the caregivers should dementia or alzheimer's become a factor?

 

[mexexpat]

Since the probability of declining cognition increases with advanced age, how do you plan to manage the caregivers should dementia or alzheimer's become a factor?

Hire a nursing agency, coordinate with our lawyer. Worst case scenario is to go to a nursing facility here. They are smaller (usually under 20 rooms) and in houses (not commercial buildings).

We saw nursing homes in the US; the 3 we are familiar with were the highest rated in DC-Metro caring for my MIL and FIL. They were awful, each in their own ways. I have visited people at local MXN homes and they are much nicer almost feels like in-home care. They run about $1500 USD equiv. a month. In the US the ones we were intimately familiar with ran around $9000 a month.

Here is clip from PBSstory on assisted living in our village.

 

[MichaelB]

I can see the attraction of planning for retirement and LTC in a lower cost of living foreign location. The lower cost of living is compelling, and it has the appearance of a safe option with a suitable standard of living. When I first retired my plan was that, and I had the advantage of already living abroad in a location with a large network of family and friends.

My plan failed badly and I see these as risky options for most people. Economic and socio-political conditions and exchange rates can change wildly and with little warning. The low cost of living can rise as the country develops. Mostly, though, seniors in developing countries are vulnerable and do not enjoy the same social advantages and protections found in developed countries. They rely heavily on family to help them carry out daily activities. Seniors in Latin America are a neglected segment of society. The US and Europe are far better options if one has adequate finances.

Retirement communities (like Lake Chápala) cater to expats and do create some support infrastructure for seniors, but it’s not yet clear the residents there can withstand or survive hard times. The Mexico financial crisis of 1994 left many US retirees ruined.

 

[pb4uski]

Not sure how it would work elsewhere, but in Illinois having your stash in tax deferred accounts such as an IRA or 401k does not remove it from your asset base in qualifying for Medicaid.

Too bad. That would be a really easy work-around.

OTOH, in smallish amounts, having your stash in an IRA can help you fib to the authorities about your financial status. For example, a close buddy in Florida lives on a very tight budget, just his SS. He has about $100k in an IRA but hasn't started RMA's yet. He applied for and receives state aid to pay for his Part B and Part D Medicare based on his low income and lack of assets. When applying, he just omitted that he has the IRA and since there is no tax reporting of IRA unearned income until withdrawn, the state hasn't figured it out in several years. IOW, the IRA dollars are sort of "hidden" since they don't show up on your tax return which is the main instrument most states use in checking on your income and asset status. Of course, you have to feel comfortable fibbing to the gov't folks who may or may not be pissed if/when they catch you.

What your friend thinks of as "fibbing", many would consider lying or haps even fraud.... and if they catch him they be pisseenough to send him to prison.

 

[googily]

I think the married/single variable is a big deal.

If I were single, I'd have no problem assuming I'd sell (or my children would sell) my house when I needed a facility. My house is worth almost two years of nursing home care in my area. Also, if I were single, I don't think I'd be too excited about home care (unless I had a strong desire to die at home, like my MIL and one of my aunts). An ALF would look pretty enticing pretty quickly.

But, married means the house is the last asset you tap, not the first.

I will say that this thread has actually given me some slight comfort about the notion of The Future. As a childless widow, I may end up warehoused with no visitors when it comes time for a nursing home, but I ought to be able to afford a really nice one, at least, since I have no worries about selling the house or wanting to leave an estate. Spend it all!

(And my trust is set up so that if I am declared incapacitated, my trustee can sell the house to pay for my care, since it's owned by the trust, as is my taxable brokerage account. So my bigger worry is my sibling pulling the trigger way too early. )

I am also hoping that in the next 20 years there is enough disruption to how we handle declining health that the landscape will be far different from what it is now.

 

[Rianne]

Great video, I've sent around to friends.

 

[REWahoo]

So my bigger worry is my sibling pulling the trigger way too early. )

So you're saying it might have been a mistake when you told them to "shoot me when I get old"?

 

[mexexpat]

I can see the attraction of planning for retirement and LTC in a lower cost of living foreign location. The lower cost of living is compelling, and it has the appearance of a safe option with a suitable standard of living. When I first retired my plan was that, and I had the advantage of already living abroad in a location with a large network of family and friends.

My plan failed badly and I see these as risky options for most people. Economic and socio-political conditions and exchange rates can change wildly and with little warning. The low cost of living can rise as the country develops. Mostly, though, seniors in developing countries are vulnerable and do not enjoy the same social advantages and protections found in developed countries. They rely heavily on family to help them carry out daily activities. Seniors in Latin America are a neglected segment of society. The US and Europe are far better options if one has adequate finances.

Retirement communities (like Lake Chápala) cater to expats and do create some support infrastructure for seniors, but it’s not yet clear the residents there can withstand or survive hard times. The Mexico financial crisis of 1994 left many US retirees ruined.

Strongly disagree with your statement that I have bolded. Seniors in MX are given far more respect than in the US. Even at age 65, when I am in a tienda and approach the cashier, teenagers will insist I go to the front of the line! When I see an abuela get off the local bus I will take her hand and walk across the street with her, because...well, that's what we do here.

I have no children and my siblings are much older than I. I essentially have no family in the US upon to rely when I am old...I do not expect nieces and nephews to assist me. Mexican people are friendly and helpful by nature. I will take my chances with them.

 

[googily]

So you're saying it might have been a mistake when you told them to "shoot me when I get old"?

I *knew* I shouldn't have given him my grandparents' old 30-30!

Definitely won't ever agree to "go for a Sunday drive in the country" with him.

 

[Scuba]

One caveat although the people on this Board are probably sharp enough to avoid this pitfall. I saw a really sad story about a woman thrown out of her house because her husband had gone into LTC. They'd taken out a reverse mortgage and because she was younger, they could get more $$$ of her name wasn't on it. So- when he entered LTC the reverse mortgage became due.



You'd also need to make sure that the spouse at home has the resources to maintain it, pay property taxes, etc. Reverse mortgage companies want to protect their interests (don't blame them for that) and I think they can actually terminate the agreement if you let the house fall apart or stop paying property taxes.

Thanks for your comments, Athena53. I agree. In our case, it’s likely that we won’t even have to rely on a reverse mortgage between pension income, SS, and our portfolio. However if one spouse ended up needing LTC for many years such that the ability of the other spouse to live comfortably would potentially be compromised, a joint reverse mortgage is IMO a very viable fallback plan, and is preferable to shelling out thousands every year for LTC insurance we may never use or that may not be accepted by our care method of choice at that time.

Not saying LTC insurance is a bad choice for others. I just don’t see why it would be a good choice for us when we aren’t concerned with leaving a big inheritance behind and have a sizable portfolio, a pension, SS, and a valuable home to tap into as needed.

 

[anethum]

Both of my parents have needed long-term care. My dad needed skilled nursing for many months after he had a stroke around the age of 94. He had dementia starting around 90 but my mom remained in good shape while he was alive. Less than 6 months after he died, my mom developed dementia. She wouldn't accept any help at home until she fell and broke both her pelvis and a wrist. Even after both healed and she was walking again, the caregivers have remained more than a year later. She's now 96. She fell again about 6 months ago and broke a vertebrae in her neck, and recovered from that. She is very frail and has virtually no short-term memory, but she otherwise has no known underlying disease. She could live for several more years, though she has told me on many occasions that she'd like to die. She has outlived nearly everyone she knows and her quality of life is lousy.

A few decades ago, my dad told me that they attended a presentation for LTC insurance. They decided against it because he had a generous COLA'd pension and they always LBYM'd. Now that he's no longer alive, my mom's survivor pension is greatly reduced. It's a good thing my parents saved and invested fairly well because now that money is paying for my mom to remain in her home. Between the two of them, their LTC expenses in a high COL area have been more than $300,000 thus far. I've been managing their finances for many years, and she's OK for several more years. Selling her house is a backup plan, if necessary.

Even though she has 24/7 care now, I have to buy most of her food and household goods, pick up her medicines, take her to doctors, pay her bills, arrange for and pay the caregivers, and handle her finances. Fortunately, I live just 10 minutes away, but I'm nonetheless restricted on how I'd like to be living in my own retirement.

I wouldn't want to live the way my mom has been living. I hope that when the time comes, I have the both the means and the courage to peacefully end my life.

 

[Huston55]

Even though she has 24/7 care now, I have to buy most of her food and household goods, pick up her medicines, take her to doctors, pay her bills, arrange for and pay the caregivers, and handle her finances. Fortunately, I live just 10 minutes away, but I'm nonetheless restricted on how I'd like to be living in my own retirement.

I admire you for making your Mom a priority.

 

[Scuba]

Both of my parents have needed long-term care. My dad needed skilled nursing for many months after he had a stroke around the age of 94. He had dementia starting around 90 but my mom remained in good shape while he was alive. Less than 6 months after he died, my mom developed dementia. She wouldn't accept any help at home until she fell and broke both her pelvis and a wrist. Even after both healed and she was walking again, the caregivers have remained more than a year later. She's now 96. She fell again about 6 months ago and broke a vertebrae in her neck, and recovered from that. She is very frail and has virtually no short-term memory, but she otherwise has no known underlying disease. She could live for several more years, though she has told me on many occasions that she'd like to die. She has outlived nearly everyone she knows and her quality of life is lousy.

A few decades ago, my dad told me that they attended a presentation for LTC insurance. They decided against it because he had a generous COLA'd pension and they always LBYM'd. Now that he's no longer alive, my mom's survivor pension is greatly reduced. It's a good thing my parents saved and invested fairly well because now that money is paying for my mom to remain in her home. Between the two of them, their LTC expenses in a high COL area have been more than $300,000 thus far. I've been managing their finances for many years, and she's OK for several more years. Selling her house is a backup plan, if necessary.

Even though she has 24/7 care now, I have to buy most of her food and household goods, pick up her medicines, take her to doctors, pay her bills, arrange for and pay the caregivers, and handle her finances. Fortunately, I live just 10 minutes away, but I'm nonetheless restricted on how I'd like to be living in my own retirement.

I wouldn't want to live the way my mom has been living. I hope that when the time comes, I have the both the means and the courage to peacefully end my life.

She is very lucky to have you!

 

[MichaelB]

Strongly disagree with your statement that I have bolded. Seniors in MX are given far more respect than in the US. Even at age 65, when I am in a tienda and approach the cashier, teenagers will insist I go to the front of the line! When I see an abuela get off the local bus I will take her hand and walk across the street with her, because...well, that's what we do here.

I have no children and my siblings are much older than I. I essentially have no family in the US upon to rely when I am old...I do not expect nieces and nephews to assist me. Mexican people are friendly and helpful by nature. I will take my chances with them.

My point was more about infrastructure, not social deference. I’m not suggesting the expat locations in Mexico should not be considered, but I do believe everyone should know exactly what they can expect. Seniors living independently may encounter a variety of needs. These are key

- Assistance with lifestyle activities, such as shopping for groceries, attending Sunday service, getting a hair cut, going to the bank.
- Meal preparation
- Assistance with ADL’s, such as bathing, dressing, etc.
- Assistance with ambulatory restrictions.
- Skilled medical care
- Assistance with cognative decline.

A US expat in Latin America should easily get assistance with ADLs, and meal prep. Nursing care is probably available, although standards may not be as high. The other items will prove to be more challenging.

The difference in physical infrastructure between the US and low COL developing countries is important to understand. My point about “senior neglect” is about the physical and commercial infrastructure. Roads, cities, stores, transportation, delivery services etc., are just not designed and built with standards that enable easy navigation by older, slower & more fragile members of society. Those that have ample funds can deal with that by hiring lots of help, and the rest stay close to home. That may be acceptable, but as my care needs grow and become more specialized, the unskilled low-cost caregiver will not suffice. Lifestyle now is more difficult to maintain, and access to skilled and specialized assistance not easy.

 

[youbet]

What your friend thinks of as "fibbing", many would consider lying or haps even fraud.... and if they catch him they be pisseenough to send him to prison.

Perhaps I chose the word "fibbing" a bit sarcastically??

I'm not worried about him winding up in prison however. Of all the activities going on outside the law in Fla, I doubt spending the money for a full investigation (including testing his cognitive and emotional status which, as a geezer, are questionable) and prosecution would be worth it to the authorities. Petty welfare cheaters very seldom see jail time. The authorities might very well be able to somehow seize his IRA funds and remove what they think he owes them though.........

I don't support his "hide the money" activity in any way. Just pointing out to OP that money in a deferred account pre-RMD leaves open the possibility of appearing to have fewer assets and lower income than you actually do if you walk outside the lines a bit. Something I would never do of course.

 

[mexexpat]

My point was more about infrastructure, not social deference. I’m not suggesting the expat locations in Mexico should not be considered, but I do believe everyone should know exactly what they can expect. Seniors living independently may encounter a variety of needs. These are key

- Assistance with lifestyle activities, such as shopping for groceries, attending Sunday service, getting a hair cut, going to the bank.
- Meal preparation
- Assistance with ADL’s, such as bathing, dressing, etc.
- Assistance with ambulatory restrictions.
- Skilled medical care
- Assistance with cognative decline.

A US expat in Latin America should easily get assistance with ADLs, and meal prep. Nursing care is probably available, although standards may not be as high. The other items will prove to be more challenging.

The difference in physical infrastructure between the US and low COL developing countries is important to understand. My point about “senior neglect” is about the physical and commercial infrastructure. Roads, cities, stores, transportation, delivery services etc., are just not designed and built with standards that enable easy navigation by older, slower & more fragile members of society. Those that have ample funds can deal with that by hiring lots of help, and the rest stay close to home. That may be acceptable, but as my care needs grow and become more specialized, the unskilled low-cost caregiver will not suffice. Lifestyle now is more difficult to maintain, and access to skilled and specialized assistance not easy.

FYI, when US doctors hear I live nr. Guadalajara many tell me they did some training there and/or continue to attend CE conferences there. GDL is where most of MX's teaching hospitals are located. Although my MXN ortho (based in GDL but comes to our village 2x a week) trained at the renowned Cleveland Clinic...about the best ortho hospital in the US.

Ajijic and Lake Chapala were not 'discovered' by expats....it has been the summer and weekend homes to the upper class Tapatios since there was a road built to it. Many of these families are headed by doctors. In the past 10 years many of the doctors have either opened an office at the Lake or joined an existing practice here and come here 2x or 3x a week; most are specialists.

As I type there are 2 new hospitals being built at the Lake...both by a consortium of doctors.

My local GP here makes house calls as do most. 300 pesos (15 bucks).

 

[audreyh1]

Since the Genworth LTC thread is unavailable and I had a thought to share on self-insuring for LTC, I decided to bump this thread.

According to the American Association of Long-Term Care Insurance website (http://www.aaltci.org/long-term-care-insurance/learning-center/probability-long-term-care.php):





So, if you ignore the less than 3 months above because of the 90 day elimination period, the expected length of stay is about 2.13 years.... I'll round that up to 2.5 years to be conservative. At $85k/year (the average annual cost in my area) the expected value of claims is ~$74k (2.5 years * $85k a year * 35% chance of making a claim).

Worst case, assuming a 100% chance of a 7.5 year stay is $638k. Best case is $0.

I can afford the worst case though it wouldn't be easy but I just don't see the value of LTC insurance when I can self-insure.

It’s slightly more complicated than that. Most LTC policies available today will only cover 3 to 4 years worth in total $ and then you are on your own. So you really only need to be able to self-insure that 3 to 4 years max amount get the equivalent coverage. You can’t buy a 7.5 year policy.

 

[audreyh1]

I am married so using your figures for two people that is $1276K and that assumes no inflation (or your investment keeps up with LTC inflation) over those 7 years and you go into a nursing home tomorrow 20-30 years LTC could be much more expensive (i.e.4-5% inflation rate) or much less expensive if there are significant improvements.

Of course where I like LTC at todays prices is $87,000(semi-private) to $108,000 (private room) for nursing home in private room,

If you assume your investments grow at least as fast as LTC inflation than I guess you need to have $1,276,000 to protect the worst/worst case moving forward waiting until a couple might go into LTC for 7.5 years. I would not do that but I may purchase a hedge against that case in the form of LTCi.

I disagree. You only have to cover one person for LTC expenses so as not to leave the other destitute - they will continue to have the remaining portfolio to live long term. So I only figure the amount to self-insure one of us. The remaining person can spend the portfolio assets to zero if needed - sorry heirs. The remaining portfolio should still be larger than a second LTC Insurance policy would cover - perhaps the definition of being able to self-insure?. (If they remarry they had better marry someone who can also self-insure)

Some people specifically carry LTC insurance to protect their heirs.

 

[audreyh1]

God Speed with your plan!

$120,900: Maximum amount of assets that a healthy spouse can retain for the other spouse to be eligible for long-term care benefits provided by Medicaid, 2017. (Actual amounts vary by state.)

46.7%: The expected percentage of men turning 65 who will have a long-term care need during their lifetimes.

57.5%: The expected percentage of women turning 65 who will have a long-term care need during their lifetimes.

$0: Median household wealth for people who have lived in a nursing home for six years or more.

Here are some stats reported by Morningstar.

75 Must-Know Statistics About Long-Term Care

Don’t forget about current available LTC policy max payout limits. Even people with LTC coverage end up paying out personally in the worst case scenarios.

You can buy yourself 3 to 4 years worth of LTC coverage, then you are back on your own. So I see it as simply being able to cover a generous LTC policy max payout for one of us.

 

[Dtail]

Don’t forget about current available LTC policy max payout limits. Even people with LTC coverage end up paying out personally in the worst case scenarios.

You can buy yourself 3 to 4 years worth of LTC coverage, then you are back on your own. So I see it as simply being able to cover a generous LTC policy max payout for one of us.

My parents have older policies with unlimited payouts for nursing care.

 

[audreyh1]

My parents have older policies with unlimited payouts for nursing care.

For deciding whether to self-insure or buy an LTC policy, you can only consider what is available to buy today.

Lots of folks here have different deals, but many not available anymore, and only some states have LTC insurance sheltering benefits that protect heirs from Medicaid clawbacks.

 

[Mdlerth]

Both of my parents have needed long-term care. My dad needed skilled nursing for many months after he had a stroke around the age of 94. He had dementia starting around 90 but my mom remained in good shape while he was alive. Less than 6 months after he died, my mom developed dementia. She wouldn't accept any help at home until she fell and broke both her pelvis and a wrist. Even after both healed and she was walking again, the caregivers have remained more than a year later. She's now 96. She fell again about 6 months ago and broke a vertebrae in her neck, and recovered from that. She is very frail and has virtually no short-term memory, but she otherwise has no known underlying disease. She could live for several more years, though she has told me on many occasions that she'd like to die. She has outlived nearly everyone she knows and her quality of life is lousy.

A few decades ago, my dad told me that they attended a presentation for LTC insurance. They decided against it because he had a generous COLA'd pension and they always LBYM'd. Now that he's no longer alive, my mom's survivor pension is greatly reduced. It's a good thing my parents saved and invested fairly well because now that money is paying for my mom to remain in her home. Between the two of them, their LTC expenses in a high COL area have been more than $300,000 thus far. I've been managing their finances for many years, and she's OK for several more years. Selling her house is a backup plan, if necessary.

Even though she has 24/7 care now, I have to buy most of her food and household goods, pick up her medicines, take her to doctors, pay her bills, arrange for and pay the caregivers, and handle her finances. Fortunately, I live just 10 minutes away, but I'm nonetheless restricted on how I'd like to be living in my own retirement.

I wouldn't want to live the way my mom has been living. I hope that when the time comes, I have the both the means and the courage to peacefully end my life.

This is exactly the answer I wanted from this thread. Real life numbers from real life people hitting the perfect storm. Anethum's story approaches a worst-case scenario, with both members of a couple in a HCOL area, living a very long time and both needing skilled care for years.



The bottom line is that a really expensive LTC situation could set you back something in the neighborhood of four hundred large in today's dollars. Certainly a significant amount, but not unattainable for FIRE types. If your kitty will withstand that as you near the end of your RE run, you can cross money off the Worry List and focus on making your peace with your maker.



That's for the almost-as-bad-as-it-can-possibly-get situation. It follows that the more likely situations would be considerably less dear.



I checked some online quotes for insurance for LTC, and saw rates on the order of 2000/year for a single 55 year-old, 2500/yr for a couple at 55, and 3400/yr for a 60 year-old couple. I invite others to play with those numbers in a financial calculator. Use some reasonable assumptions about average returns and the possibility of those rates being jacked up after 5 or 10 or 20 years, and then draw your own conclusions about self-insuring.