Edelman - Change in thinking about LTC insurance

[gindie]

I'm listening to Ric Edelman's weekly show as I write this. He just announced a major change in his firm's thinking about buying Long Term Care insurance. The huge increases announced recently by the Federal employee's program was the last straw.

I believe in the past he was all for it at any age. He now says:

Under age 50 - Do not buy LTC insurance. It is his belief that "exponential technology" (a favorite topic of his) will eliminate the need for LTC by 2030. He didn't explain the particular technologies he believes will accomplish this.

Over 50 - Buy a Life/LTC hybrid policy. Has advantages if you never use the LTC portion. Premiums are better controlled.

 

[Big_Hitter]

^ that's what my guy at UBS said to do

 

[samclem]

I
Over 50 - Buy a Life/LTC hybrid policy. Has advantages if you never use the LTC portion. Premiums are better controlled.

And, by happy coincidence, I'll bet he has just such products to sell (directly or indirectly).

An article by Michael Kitces on these LTC/Life Insurance and LTC/annuity products. The premiums may be "guaranteed," but that comes with a catch.

 

[Gotadimple]

Exponential Technology. Hmmm, he must have been reading Dirk Cotton. Too bad he didn't read all the way through. Cotton's latest is a discussion of exponential growth and how we take the growth pattern as fixed. He shows it does break down at some point, and comments on planners who use the technology to forecast retirement savings.

I'm not saying one needs a LTC policy, but am saying exponential technology may not be the answer either.

The Retirement Café

- Rita

 

[mickeyd]

I'd rather keep my cash and build in a buffer in my own stash to take care of any LTC needs in the future. I don't trust insurance companies. I guess I worked for them too many years. Financial guys always seem to taut LTCi because they will always have a financial stake in any potential future commission.

 

[COcheesehead]

I have the life/LTC option. The biggest reasons are:
If I don't use, there still is a pile of cash earning 3.5% that I can access.
If I use it, it won't eat up assets for my wife.
I need every tax deferred vessel I can find.

 

[jarts98]

I'd rather keep my cash and build in a buffer in my own stash to take care of any LTC needs in the future.

My plan, too.

 

[samclem]

I have the life/LTC option. . .
If I don't use, there still is a pile of cash earning 3.5% that I can access.

3.5% guaranteed, or is it a policy illustration? And how is the LTC component affected if you access that pile of cash?

Policies differ. From the Kitces article:

Yet the reality is that the guarantee of LTC premiums in a hybrid policy may be entirely offset by the fact that the insurance company controls the cash value, and is under no obligation to pay a going rate of return, especially if interest rates rise. In other words, it doesn’t really matter that the insurance company can’t increase the premiums on the policy by $4,000/year, when the company can simply under-pay on the interest rate by $4,000/year to accomplish the same result! And while the cash value of a hybrid LTC policy generally does remain liquid, taking a withdrawal to reinvest to get better, higher rates would entail surrendering the policy and forfeiting the LTC coverage! In fact, for some types of hybrid LTC policies, the arrangement contractually provides no rate of return to the client at all, and is essentially the equivalent of the client selling a call option on interest rates to the insurance company, where the more rates rise the greater the company wins at the expense of the client!

I'd rather keep my cash and build in a buffer in my own stash to take care of any LTC needs in the future.

I'd prefer to do that, but I don't think it's a practical course of action for DW and I. The potential costs of LTC are so high, and the "opportunity cost" of keeping that kind of reserve on hand and fenced off from all ability to be spent is so great, that it it really does warrant a true insurance product of some kind (e.g. we'll pay the anticipatable first two years of LTC costs for the first of us that needs it--we need true insurance to pay for a longer stay). But there just aren't any satisfactory products out there.

 

[Big_Hitter]

I'd rather keep my cash and build in a buffer in my own stash to take care of any LTC needs in the future. I don't trust insurance companies. I guess I worked for them too many years. Financial guys always seem to taut LTCi because they will always have a financial stake in any potential future commission.

Do you have that risk quantified at all? I'm working on something similar in addition to health costs in er/nr. both of those are random variables with what I think are large standard deviations

there is a reason insurance companies are getting out of ltc

 

[COcheesehead]

3.5% guaranteed, or is it a policy illustration? And how is the LTC component affected if you access that pile of cash?

That's the guaranteed floor. It can go up, but I doubt it ever would. If you access the cash, both the death benefit and the LTC rider go down by what you take out.

 

[mathjak107]

most hybrids have no inflation protection . 20 years from now it may not cover what you thought it would .

we figured out that for the amount of money we would have to plunk down for 120k a year here in ny in todays dollars , the return is so low that we can actually invest that money normally , take a small piece of the long term return and actually buy an ltc policy and come out a head .

 

[COcheesehead]

most hybrids have no inflation protection . 20 years from now it may not cover what you thought it would .

we figured out that for the amount of money we would have to plunk down for 120k a year here in ny in todays dollars , the return is so low that we can actually invest that money normally , take a small piece of the long term return and actually buy an ltc policy and come out a head .

The policies we have on the two of us will cover about 1.2 million. Even with inflation, that will protect some of our other assets. I know it may not cover 100% in the future, but at least it is something.
I had to sell my Dad's assets to help cover his care. I don't want my wife or family to have to do the same. Some is better than none.
There is also one other, minor, but nice benefit of the policy. The funds are not attachable if I were to get sued. So in that regard they are super safe funds.

 

[Options]

Do you have that risk quantified at all? I'm working on something similar in addition to health costs in er/nr. both of those are random variables with what I think are large standard deviations

there is a reason insurance companies are getting out of ltc

I plan to self-insure as well. No, the "risk" isn't quantified, but there are various studies on the length of time spent in a nursing home. I have no intention of languishing in a nursing home, not even for a short time. My end of life costs will entail use of home health aides.

Here are some sources for estimating costs:

Costs of Care in Your State - Long-Term Care Information

https://www.genworth.com/about-us/industry-expertise/cost-of-care.html

Costs of Care in Your State - Long-Term Care Information

WSJ Flash Interactive - WSJ

https://www.senioradvisor.com/

 

[REWahoo]

I have no intention of languishing in a nursing home, not even for a short time. My end of life costs will entail use of home health aides.

I think it's fair of me to say that's true of virtually everyone on this board. Sadly, we don't always get to follow our intentions.

My FIL was a poster child for a tough, self-reliant old west Texas cowboy who frequently claimed he would shoot himself before he spent even one night in one of those "funeral home waiting rooms." He truly meant it, and always kept a loaded pistol within reach.

His intentions didn't prevent him from having a stroke at age 89 and spending the last year of his life in a nursing home. He was far too disabled to be cared for at home.

 

[Options]

I think it's fair of me to say that's true of virtually everyone on this board. Sadly, we don't always get to follow our intentions.

My FIL was a poster child for a tough, self-reliant old west Texas cowboy who frequently claimed he would shoot himself before he spent even one night in one of those "funeral home waiting rooms." He truly meant it, and always kept a loaded pistol within reach.

His intentions didn't prevent him from having a stroke at age 89 and spending the last year of his life in a nursing home. He was far too disabled to be cared for at home.

In my case, having a serious health condition in my 40's gave me a practice run of coming "this* close to dying and *this* close to ending my life before events deteriorated further. Of course I completely recovered, but I don't at all regret the degree of planning and foresight I used and would have no qualms of repeating the exercise should conditions arise in the future.

This is why end of life planning and dicussions, done earlier rather than later, are so important, including specific instructions. The person who has my MPOA is very much aware of my wishes.

Here's a great guide from Fidelity on the subject of key discussions to have with loved ones:

https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/Aging_Well_Guide.pdf

Every life tells a story—and every story has an
ending—but planning for that natural conclusion
is an act of love. We know it’s not easy to
think about death—your own or a loved one’s
—but it’s absolutely critical.

88% of clients believe they’ve
successfully prepared for their
family’s financial future, yet just 8%
have completed both key plan
documents and crucial
conversations.

 

[Big_Hitter]

I plan to self-insure as well. No, the "risk" isn't quantified, but there are various studies on the length of time spent in a nursing home. I have no intention of languishing in a nursing home, not even for a short time. My end of life costs will entail use of home health aides.

good luck with that - I think half of those in LTC had the same plans

hopefully we will have robots by then so we don't have to stay in a nursing home

 

[COcheesehead]

I watched two close relatives stay in a home beyond their ability to care for themselves. Assets get eaten up quickly.

 

[Big_Hitter]

I watched two close relatives stay in a home beyond their ability to care for themselves. Assets get eaten up quickly.

what is it now, $5K a month for a ghetto LTC facility?

 

[growing_older]

(e.g. we'll pay the anticipatable first two years of LTC costs for the first of us that needs it--we need true insurance to pay for a longer stay).

I am not aware of any LTC insurance that insures only the long tail of an extended stay. That would indeed be insurance and I would be interested in buying a product like that.

What I have seen is all the policies I've been offered have a cap on the number of years to claim benefits, but no cap on the premium increases allowed. No thank you.

 

[COcheesehead]

what is it now, $5K a month for a ghetto LTC facility?

At least.

 

[Options]

Doctors view end of life scenarios differently than the general population:

How doctors die. It’s not like the rest of us, but it should be – Cancerworld

It’s not a frequent topic of discussion, but doctors die, too. And they don’t die like the rest of us. What’s unusual about them is not how much treatment they get compared to most Americans, but how little. For all the time they spend fending off the deaths of others, they tend to be fairly serene when faced with death themselves. They know exactly what is going to happen, they know the choices, and they generally have access to any sort of medical care they could want. But they go gently.

emphasis added

 

[Sunset]

I am not aware of any LTC insurance that insures only the long tail of an extended stay. That would indeed be insurance and I would be interested in buying a product like that.

What I have seen is all the policies I've been offered have a cap on the number of years to claim benefits, but no cap on the premium increases allowed. No thank you.

We don't have one, my worry is without caps on premiums, after I pay into it for 20 years, they can just increase the premiums drastically every year until I have to stop paying.
Then maybe I'll need it, but I won't have it, or the cash spent trying to keep it.

 

[mathjak107]

for the amount of money we would have to plunk down in the tristate area for enough coverage with one of those linked benefit plans , at those low return rates we can invest that sum normally and pay the premium on a real ltc plan for just a piece of our gains .

which is what we did . bought a new york state partnership plan . we wanted it for all the great perks after the 3 years insurance was up .

 

[LARS]

Continuing to self insure. If we can't cover potential costs given net worth then neither will 99% of the country. If I'm wrong, which won't be the first time, we will have to make do with "misery loves company" of which I figure there will be plenty.


Sent from my iPad using Early Retirement Forum

 

[COcheesehead]

for the amount of money we would have to plunk down in the tristate area for enough coverage with one of those linked benefit plans , at those low return rates we can invest that sum normally and pay the premium on a real ltc plan for just a piece of our gains .

which is what we did . bought a new york state partnership plan . we wanted it for all the great perks after the 3 years insurance was up .

Everybody needs to make up their own mind and it's sounds like you did want you wanted/needed. For us though, I hated the use it or lose it aspect of a standalone LTC policy. With a LTC rider, the cash and or the death benefit is still there if you don't use the policy.