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What is Considered LTC Self-insure Safe Level?
Old 05-14-2017, 07:45 PM   #1
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What is Considered LTC Self-insure Safe Level?

What do you all think is an asset value for self-insuring vs long term care? I realize it depends on your location to some extent (high COL area vs lower COL), current age, and also what total assets are. Just curious what is a good value to consider as part of the assets that can be assigned or delegated to LTC? Is $100k, $250K, or what is a good amount?

Reason I ask is debating on self-insure and leaving that money invested and (hopefully) growing vs withdrawl to cover that LTC payment?

I appreciate the discussion and suggestions how to address this with my financial planning. I'm 53, DW is 64, both good health currently. We both work part-time right now, and both will be retiring this year. Just waiting for current house to sell, then will have an official work end date.
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Old 05-14-2017, 08:02 PM   #2
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IMO you have to look at your family history before you decide to self insure . My family has never had anyone in a nursing home longer than a few months. If your family has a history of alzheimer's or a history of long time nursing home stays than I would reconsider self insuring.
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Old 05-14-2017, 08:36 PM   #3
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Originally Posted by 38Chevy454 View Post
What do you all think is an asset value for self-insuring vs long term care? I realize it depends on your location to some extent (high COL area vs lower COL), current age, and also what total assets are. Just curious what is a good value to consider as part of the assets that can be assigned or delegated to LTC? Is $100k, $250K, or what is a good amount?
Sorry, but it really is too complicated to even give a ballpark estimate for "the number" you would need.
You can find estimates for the avg. cost of nursing home care in your area, let's say it is $250 per day. You specified "safe," so the very safest level would be enough to fund you and your spouse both checking in to a NH right now ($500 per day) and staying there for your normal life expectancy. Let's say that's 25 years (of course, it would be more complex than this--you'd really need to fund enough to cover the last person the die, which would be longer than 25 years). That would require $4.56 million dollars available on day one (assuming your starting nest egg grew at the same rate as nursing home costs). Now, as you get older your expected duration of the NH stays decreases, but your risk of needing the LTC goes up.
Obviously the above case is very very unlikely to happen. Chances are very remote that either of you would live 25 years once you require LTC, and even less likely that both of you would live that long.

As a practical matter, many people plan on self-funding 5 years of LTC. That's longer than the average person needs LTC (though some people do need it for much longer). The present lookback period for Medicaid funding of LTC expenses is 5 years in many states, so these people are assuming that they will put most of their holdings in a trust as soon s they start needing LTC (and therefore out of Medicaid consideration, and available to fund the living expenses of the other spouse), then spend down their own money for LTC the next 5 years. At that point, they will have very few assets left in their own name outside of the trust, and if they are still alive they will throw themselves on the mercy of the State to fund their LTC for their remaining life. It's a risky approach, as laws can change (lookback could change to 10 years?), they might not find an good facility that accepts Medicaid for payment, etc . But it does serve to put a "cap" on the duration of LTC that would need to be self-funded. (Note--I am not a lawyer, the above is just a synopsis of what I believe might be the case).

Also, in the case of DW and I, the most "strenuous" case is if one of us is in a NH and other is still living in the big world. OTOH, if there's nobody living outside the NH, the house and most belongings can be sold to pay LTC expenses, there are no vehicle expenses, no home ownership expenses, etc.

Edited to add: Okay, here's a ballpark estimate (despite all I wrote before):
IIRC, most people require less than 3 years of LTC. Let's assume that is a nursing home, and in my location that would cost $250/day. So, we'd need $275,000 to fund that. If we go to 5 years (and depend on Medicaid after that, per above), then the number is $450,000. It doesn't matter if that care is required tomorrow or 30 years from now--if we assume we can get investment returns that equal the increase in LTC costs. For the second member of the couple, no additional "set-aside" is required because LTC costs out to 5 years (and probably a lot farther) would be covered by sale of the house and spend-down of the nest egg that was intended to cover regular living expenses during retirement. SS checks will also be coming in, they can help pay for LTC as well, helping the nestegg to last longer. So, in this very simplified case, (and taking some risk regarding the Medicaid rules and investment returns matching LTC costs), the couple would need to set aside between $275K and $450K to self-fund LTC. We can reduce that amount by any $$ in the nest egg that would not be required to support the SWR for a single-person household. Either way, self-funding (even if we take some risk) takes a big chunk of change. Too bad, as it >likely< won't be needed, but would need to be kept on hand even well into old age, so it will likely go unspent and become part of the estate. It sure would be nice if we could buy true LTC insurance that we could believe in.
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Old 05-15-2017, 03:51 AM   #4
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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 .

most of 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 . 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 .

my co-worket at age 55 fell off a ladder painting , broke his hip and wrist and had a stroke during hip surgery . he was paralyzed and needed care . i he is in a snf and it devastated his wife financially so regardless of age you do need a plan now that is well funded .

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 .

the other issue is as the insurers found out usage is far greater than statistics showed and so getting pricing correct was a problem for years .

those with insurance tend to use it and not burden family . so the statistics actually reflect a generation ago because most boomers are not in range yet for care . we live longer today , we realize the strain it puts on family and we tend to relay on outside help a whole lot more .

statistics also failed to reflect the fact the budget was slashed in medicaid for nursing home care . many folks who needed care were sent to kind of midway places but they did not count as needing snf care so they were dropped from the ranks .

insurers found things so under estimated as far as usage .
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Old 05-15-2017, 04:16 AM   #5
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I use $500K as the "extra" we might need to cover either LTC for one and/or one of us developing serious medical issues uncovered by insurance before Medicare eligibility.

We have way more than that in fixed income investments, so at this point I don't have anything specifically set aside, just an awareness that such an amount could be needed. Just ballpark too - +/- $100K doesn't matter.

No children. Heirs are other family members.
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Old 05-15-2017, 05:26 AM   #6
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Originally Posted by 38Chevy454 View Post
What do you all think is an asset value for self-insuring vs long term care? I realize it depends on your location to some extent (high COL area vs lower COL), current age, and also what total assets are. Just curious what is a good value to consider as part of the assets that can be assigned or delegated to LTC? Is $100k, $250K, or what is a good amount?
Yes, there are a lot of variables.

This might help: Long-Term Care Calculator - Compare Costs of Nursing Homes, Assisted L... - AARP
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Old 05-15-2017, 05:43 AM   #7
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I use $500K as the "extra" we might need to cover either LTC for one and/or one of us developing serious medical issues uncovered by insurance before Medicare eligibility.

We have way more than that in fixed income investments, so at this point I don't have anything specifically set aside, just an awareness that such an amount could be needed. Just ballpark too - +/- $100K doesn't matter.

No children. Heirs are other family members.


+1
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Old 05-15-2017, 05:55 AM   #8
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Personally I haven't given it a lot of thought but probably should. You just never know how long you might need LTC. Months or years. For me I have some assets that I don't plan on selling until the time comes that I don't need (or want) or can't enjoy them anymore. Thinking about it for 2 minutes, I think those assets should cover my LTC needs pretty well. If I had to put a number on it, I'd say >500k, to be comfortable. But that's me.
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Old 05-15-2017, 07:37 AM   #9
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Unless one has family history of needing long term care, the odds are against needing significant amount of assistance. We plan to dip into our assets if the need arises. Considering 3 yrs of LTC, we (or one of us) can still get by on the remaining part of our assets. We'd like to leave something to our DS's but that is secondary to our needs. If we need it to live our lives, then that will be done.
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Old 05-15-2017, 07:39 AM   #10
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if medicaid planning will be utilized if the insurance runs out most states require 5 years look back unless it is a state partnership plan and you can just use 3 years insurance because there is no look back involved ..

keep in mind too , these plans cover assisted living and in home care so it isn't about just a nursing home . our plan cover 3 years in an snf and then the bills go to medicaid to pay but it also covers 6 years in home care or assisted living .

many nicer homes will not take medicaid patients day 1 . but if you are a paying customer for a few years they will take medicaid down the road

more and more states are coming to the realization that having a state filled with impoverished seniors is not good . the way it is now is the stay at home spouse ends up blowing through resources and becomes impoverished and now 2 people are supported by medicaid and welfare .

so all these tools and laws that allow assets to be retained to help support the stay at home spouse are left in place for those who want to utilize them .

like our tax system which is based on your fair share of taxes is whatever you can get them down to using the laws and tools left in place so is our long term care system . .

new york , CT and FLORIDA are big on not impoverishing the citizens in the state .
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Old 05-15-2017, 08:12 AM   #11
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Another thought: LTC insurance isn't very expensive >if< bought at a young-ish age and >if< inflation protection isn't purchased. So, in effct you can purchase the insurance knowing it will be losing its value every year, and then self-fund the difference between that coverage and what your needs are reasonably likely to be.

Example: A 60 YO can buy $273K in LTC insurance (3 years at $250/day) for a premium of $122 per month (example, from the Federal LTC insurance program). The price for a shared benefits plan bought on the individual market to cover both members of a couple (but one $273K pot of benefits) might be a bit more. There's no inflation coverage, so that $250/day benefit will stay fixed, but (hopefully) the premiums won't be going up much, either (i.e you'll be paying those future premiums with inflation-ravaged dollars, too). You'll have bought the first 3 years of LTC coverage for the first to need it, and you could set aside/save up enough money in your own portfolio to self-fund the expected growing difference between the insurance amount and the possible cost.

As a side-benefit, if the LTCi is compliant with state partnership plans (mentioned by mathjak107--check the rules in your state, he lives in NY and the rules there are very generous), the couple would qualify for Medicaid coverage for LTC without needing to spend down their assets to zero--the coverage amount of the insurance is excluded from Medicaid lookback provisions.

The $122/mo premium ain't chicken feed, but it's a compromise position that is considerably less than an inflation-protected LTC policy would be and which reduces the size of the set-aside needed right now.
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Old 05-15-2017, 08:15 AM   #12
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in our case 100% of all assets are excluded regardless what medicaid spends and most important there are no medicaid limitations on the stay at home spouses income .

it can be great that you protected a million bucks in assets , but if medicaid is needed the stay at home spouse is limited to a very low income .

we could have gotten a cheaper dollar for dollar spent plan but we wanted total asset .


we really bought for all these perks not the 3 years insurance which we easily could self insure .

we took it when i was 62 , my wife 64. we took 350 a day , 5% inflation adjusted a year , 90 day elimination , full asset and income protection. we pay 8k a year less a 1600.00 state tax credit and whatever we get from the federal medical deduction .

i got hit with a 1k surcharge because we waited so long to take it i had a few blood tests showing i was diabetic , even though without meds i am high normal today.

it is priced so you pay in total premiums about 1 year in a snf at the age's you are most likely to need care.

it gets tougher and tougher to get the longer you wait . even being over weight can get you rejected .

they came and did full blood testing ,urine , hiv , drug ,etc as well as a bunch of memory tests before accepting us .
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Old 05-15-2017, 08:33 AM   #13
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How does the lookback thing work on 401k and IRA assets as well as future SS income?

If you and your spouse are 60 and have a million in one 401K plus a few hundred thousand in Roths, plan to take SS at 70, can they make you start SS early to pay for LTC or make you tap the 401K or IRA of either spouse?

Our plan is to exhaust almost all of our money in taxable accounts by the time we are 60, leaving all remaining assets in Roth and 401K. The Roth IRAs by then will be large enough to replace our yearly spending needs until we draw SS.

So there would be no big nest egg outside of those funds. This also provides some level of bankruptcy protection and legal protection.
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Old 05-15-2017, 08:33 AM   #14
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if medicaid planning will be utilized if the insurance runs out most states require 5 years look back unless it is a state partnership plan and you can just use 3 years insurance because there is no look back involved ..

keep in mind too , these plans cover assisted living and in home care so it isn't about just a nursing home . our plan cover 3 years in an snf and then the bills go to medicaid to pay but it also covers 6 years in home care or assisted living .

many nicer homes will not take medicaid patients day 1 . but if you are a paying customer for a few years they will take medicaid down the road

more and more states are coming to the realization that having a state filled with impoverished seniors is not good . the way it is now is the stay at home spouse ends up blowing through resources and becomes impoverished and now 2 people are supported by medicaid and welfare .

so all these tools and laws that allow assets to be retained to help support the stay at home spouse are left in place for those who want to utilize them .

like our tax system which is based on your fair share of taxes is whatever you can get them down to using the laws and tools left in place so is our long term care system . .

new york , CT and FLORIDA are big on not impoverishing the citizens in the state .
A few years back I looked at partnership plans plans after seeing mathjak107's posts. At the time I found two states that would sell plans that would provided unlimited asset protections. I don't know the status today. Since I did not live in either of those states, I did not have access to unlimited asset protection.

If I did have access to mathjak107's plan with the costs that I saw at that time, I would have been quite interested. But without the asset protection at those level... not so much.

I just checked my state's partnership guidelines. Assets protected are equal to the amount paid by the partnership LTC policy, no more and look back is still 5 years, not 3.

Check your own state's plan or state you may move to. Also see about state's reciprocity rules. The partnership rules may have state dependencies.

Some radio advisors have used terms of $750k - $1M to cover long term care. I believe they were referring the income stream could support a person's LTC expenses. I really have not worked the numbers myself. But in general think I'll leave the assets growing (invested) to support our LTC needs and not put more than 1 or 2 years worth in cash like assets.
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Old 05-15-2017, 08:40 AM   #15
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How does the lookback thing work on 401k and IRA assets as well as future SS income?

If you and your spouse are 60 and have a million in one 401K plus a few hundred thousand in Roths, plan to take SS at 70, can they make you start SS early to pay for LTC or make you tap the 401K or IRA of either spouse?

Our plan is to exhaust almost all of our money in taxable accounts by the time we are 60, leaving all remaining assets in Roth and 401K. The Roth IRAs by then will be large enough to replace our yearly spending needs until we draw SS.

So there would be no big nest egg outside of those funds. This also provides some level of bankruptcy protection and legal protection.

at least living in new york had one good benefit , the full asset and income protection so we have no look backs or asset shifting to deal with .
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Old 05-15-2017, 09:02 AM   #16
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How does the lookback thing work on 401k and IRA assets as well as future SS income?
This link is from a law firm that handles issues like this. It looks like the spouses IRAs and 401Ks are excluded from consideration ( ) but that the Medicaid recipient's own IRAs and 401Ks are included when considering Medicaid eligibility .
It would definitely be worth getting a real reading from an elderlaw attorney who knows the rules in your state--and can also offer an informed opinion on which way the winds are blowing regarding future regulations.
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Old 05-15-2017, 09:10 AM   #17
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This link is from a law firm that handles issues like this. IRAs and 401Ks are included when considering Medicaid eligibility .
What about pensions? It really is not fair to include 401K and IRA and not include private and public pensions.

And if you do include pensions, how do you make a person cash in their pension?
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Old 05-15-2017, 09:12 AM   #18
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I use $500K as the "extra" we might need to cover either LTC for one and/or one of us developing serious medical issues uncovered by insurance before Medicare eligibility.

We have way more than that in fixed income investments, so at this point I don't have anything specifically set aside, just an awareness that such an amount could be needed. Just ballpark too - +/- $100K doesn't matter.

No children. Heirs are other family members.
SNAP!!

I had "fire-walled" a similar sum during our accumulation phase and did not use it in any SWR calculations or in FIRECALC or other retirement calculators when deciding if we had enough to RE.

7 years into retirement and pensions now covering all essentials and much more, I don't have any sums set aside for LTC.
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Old 05-15-2017, 09:14 AM   #19
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What about pensions? It really is not fair to include 401K and IRA and not include private and public pensions.

And if you do include pensions, how do you make a person cash in their pension?
Once a person is on Medicaid, there are also unearned income limits, and they are low. Income exceeding those limits must be paid to the state to offset medical care provided. From the link above:
Quote:
The next question is – how does this income affect Medicaid eligibility? Once an individual is receiving periodic payments, the payments are counted as unearned income on a monthly basis, regardless of the actual frequency of the payment. For example, if the periodic benefit is received once a year, the amount is to be divided by twelve to arrive at a monthly income amount. If the Medicaid applicant earns more than $50.00 per month, the excess income (over $50.00) would be income that, in effect, would be paid to the nursing home providing the skilled care and Medicaid would pay the difference of the monthly nursing home cost.
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Old 05-15-2017, 09:14 AM   #20
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Oh this seems to answer that:

Another way to make an applicant eligible, without having to cash-in the account and retain ownership of the retirement account, is to start receiving periodic payments from the retirement account. Once an individual is in receipt of or has applied for periodic payments, the principal in the retirement fund is not a countable resource.
The next question is – how much are the periodic payments that must be taken? Medicaid regulations state that the individual must choose the maximum income payment that could be made available over the individual’s life time; specifically, the table used is the single life table.


So you could just set up 72T with the payment over your lifetime, then there would be eligibility for LTC medicaid.
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