What is Considered LTC Self-insure Safe Level?

[Hermit]

I am self insuring. My mother never needed a day (90+ yrs old) & my dad was there for 3 weeks in 2003 before he insisted we take him home. That home cost 7k a month. So my plan includes in today's $$s:
♤ $2300 current net DBP ($2885 gross)
♡ $2316 projected SSA @ 70 (corrected)
◇ $2500 projected RMD @ 70
♧ 4 BD / 3 BA home rented out in SF Bay Area less 10% to son for handling

This is without depleting assets

I don't understand how spending RMDs does not deplete assets. This assumes your tax deferred accounts are considered part of your assets.

 

[braumeister]

Around here, low cost flyover country, you're looking at $7-10K a month currently, or more in some of the nicest places. My mom died after nearly two years of that, so it's definitely a significant consideration.

When I looked into LTC insurance in the past, the consensus was always that if you have $2M (however you want to compute that) you are better off self-insuring. With less, the calculation becomes more and more difficult, with so many different considerations (age, health, family longevity history, etc., etc.).

 

[gayl]

I don't understand how spending RMDs does not deplete assets. This assumes your tax deferred accounts are considered part of your assets.

I will have to take the RMD anyway. So I really don't view spending it there or gifting it out to my kids as much of a change in my assets

 

[aja8888]

I will have to take the RMD anyway. So I really don't view spending it there or gifting it out to my kids as much of a change in my assets

Taking RMD's does not deplete your assets, it's the spending/gifting part that does.

 

[audreyh1]

I will have to take the RMD anyway. So I really don't view spending it there or gifting it out to my kids as much of a change in my assets

I guess you don't count your IRA or 401K as part of your net worth (assets)?

Because unless you reinvest RMDs, which is always an option after paying the taxes, spending them or gifting them will reduce your assets.

Your assets will always be reduced somewhat because you will have to pay taxes on your RMD, unless it goes straight to charity out of your IRA/401K.

 

[Hermit]

I will have to take the RMD anyway. So I really don't view spending it there or gifting it out to my kids as much of a change in my assets

Your choice is certainly to spend or save the proceeds from RMDs. What is not your choice is to move RMDs from your tax deferred accounts. You may gift that amount (up to $100k/year) to charity or pay appropriate taxes on it. In any case, from a technical standpoint, you will be moving at least the taxes paid out of your assets. As you mentioned above, I have a similar "problem" that may result in a large amount of unspent savings at my demise. On the other hand, I have not linked that particular bucket to LTC self insurance.

 

[Sunset]

I will have to take the RMD anyway. So I really don't view spending it there or gifting it out to my kids as much of a change in my assets

I just want to say, if your kids don't want it. Please put me down on the list

 

[meierlde]

At least right now LTC costs qualify for the medical expense deduction, (and would not take long to exceed 10% of income to allow them to be deducted). So in that case you would take the RMD's and then the taxes on them would be wiped out by the medical expense deduction.

 

[Blue Collar Guy]

after much thought about self insuring we went with a ny state partnership plan .

.

Would you mind posting a link with the company you went with? I found the generic link but it doesnt say much, just referred me to look for "the Logo". Thanks

https://nyspltc.health.ny.gov/

 

[Sunset]

Hopefully someone who had actually done this can chime in, but I think you get pay with tax free money if you decide to self insure.
I am thinking LTC costs are considered a medical expense.

My thinking is:
And to make it fun, lets use a somewhat real number and say it costs $120,000 /yr. for LTC.

So you pull out the 100,000 from your IRA, and use your SS for the rest of the cost.
When it comes tax time, you will have a huge medical deduction so effectively you won't pay taxes saving about $26,000 in taxes out of the tax bill (single).

 

[audreyh1]

At least right now LTC costs qualify for the medical expense deduction, (and would not take long to exceed 10% of income to allow them to be deducted). So in that case you would take the RMD's and then the taxes on them would be wiped out by the medical expense deduction.

Good point!

 

[nwsteve]

Please check my thinking. Pay entry fee at a Life Care CCRC (say 500k) in HCOL area and lock in your care for skill nursing and memory if needed. Monthly fees approximate current expenses.
You can get some of the entry fee refunded to heirs but you have to be willing to up the entry fee, otherwise, refund ability stops after 5 years.
My thinking is that we are basically ante upping up a fixed amount for prepaid LTC, getting life advocacy for care and access to a known quality of SNursing/Memory care.
Thx

 

[youbet]

I will have to take the RMD anyway. So I really don't view spending it there or gifting it out to my kids as much of a change in my assets

Whether you spend the money on a NH or gift it to the kiddos, it's a depletion of your assets. A planned and acceptable depletion, but a depletion just the same.

 

[Osprey]

Interesting article at Oblivious investor on when to buy LTC insurance:

Should I Buy Long-Term Care Insurance? — Oblivious Investor

"According to a 2016 report from the National Association of Insurance Commissioners (with credit to Christine Benz’s excellent “75 Must-Know Statistics About Long-Term Care” for directing me to the report), for people turning age 65 in 2015-2019:

48% are expected to have no long-term care costs during their lifetimes,
15.4% will have costs of up to $50,000,
9.7% will have costs of $50,000-$100,000,
11.7% will have costs of $100,000-$250,000, and
15.2% will have costs that exceed $250,000."
"

 

[youbet]

At least right now LTC costs qualify for the medical expense deduction, (and would not take long to exceed 10% of income to allow them to be deducted). So in that case you would take the RMD's and then the taxes on them would be wiped out by the medical expense deduction.

The RMD income would not necessarily be completely wiped out for tax purposes. As you pointed out, the first 10% of your total income ( RMD + SS + ?) would have to be exceeded and additionally less than 100% of the NH costs are deductible as medical expenses. The NH will provide you with a document each year spelling out how much of your expense was medical and how much was non-deductible "other." I think most of the expense is medical and deductible, but unfortunately I think it varies from individual to individual and year to year and I don't have the detail. Just plan on not all of it being deductible medical expense.

But, yes, you'd have a sizable itemized medical deduction to offset a substantial part of your income including the income generated by the IRA withdrawal.

 

[Blue Collar Guy]

Interesting article at Oblivious investor on when to buy LTC insurance:

Should I Buy Long-Term Care Insurance? — Oblivious Investor

"According to a 2016 report from the National Association of Insurance Commissioners (with credit to Christine Benz’s excellent “75 Must-Know Statistics About Long-Term Care” for directing me to the report), for people turning age 65 in 2015-2019:

48% are expected to have no long-term care costs during their lifetimes,
15.4% will have costs of up to $50,000,
9.7% will have costs of $50,000-$100,000,
11.7% will have costs of $100,000-$250,000, and
15.2% will have costs that exceed $250,000."
"

Man, I really hope I dont linger, its not the last 250K+ category that scares me . It is the fact that im in a nursing home, with tubes and stuff. I had a deal with my old partner that if I got all banged up at work , we would kick the plug for each other when no one was looking. I had a work buddy that got shot in the head, he lingered for 7 years, not the way I want to go.

 

[MrLoco]

Self insuring for future LTC is very individual/family specific.

If one is single with little assets, it usually makes no sense to buy LTC insurance. Simply spend down your assets and then MEdicaid will pay until you die.

If you desire to leave an inheritance to children, buying LTC coverage could
make sense. We recently bought a traditional LTC partnership plan which has a long elimination period (180 days) and covers each of us for 2 years with a shared pool of 2 years that either spouse can draw upon. This comes with a 3% CI provision. We have assets north of $ 5 million so some might say why buy a policy ..... just self insure. We did it as a hedge. If we need it , it will only pay for about 50% of future LTC costs. We will pay for the rest. We want to leave some money to the children. Remember this if you say you will self insure and you are 25+ years away from needing nursing home /dementia care; LTC costs have outpaced inflation. You have no idea what these costs will be in 25 years and your "self insure plan" may be woefully underfunded.

Also, I would stay away from the hybrid plans. These are nothing more than a life insurance policy with a LTC rider which usually require a one time up front premium of as much as $100,000. Be careful.

 

[Marita40]

I am single with assets that border on self insure and LTC. So I'm conflicted about continuing my coverage, which I've had for 6 years now. My premiums have jumped to $3600/year. While I have no need to leave an inheritance, I still feel some peace of mind knowing that I have excellent coverage for both in home care and nursing home. On the other hand, I don't like parting with $3600/year for insurance. On the third hand, the market is up so much the pain isn't terribly significant right now. Lots of conflict here!

 

[marko]

Interesting article at Oblivious investor on when to buy LTC insurance:

Should I Buy Long-Term Care Insurance? — Oblivious Investor

"According to a 2016 report from the National Association of Insurance Commissioners (with credit to Christine Benz’s excellent “75 Must-Know Statistics About Long-Term Care” for directing me to the report), for people turning age 65 in 2015-2019:

48% are expected to have no long-term care costs during their lifetimes,
15.4% will have costs of up to $50,000,
9.7% will have costs of $50,000-$100,000,
11.7% will have costs of $100,000-$250,000, and
15.2% will have costs that exceed $250,000."
"

So stactically there's an 85% chance one's LTC would be below $250k?

 

[bingybear]

At least right now LTC costs qualify for the medical expense deduction, (and would not take long to exceed 10% of income to allow them to be deducted). So in that case you would take the RMD's and then the taxes on them would be wiped out by the medical expense deduction.

10%? I thought the medical itemized is above 7.5% AGI if one is 65yo or older. While LTC may be needed before 65, many.. most? might be later in life.

 

[ncbill]

Man, I really hope I dont linger, its not the last 250K+ category that scares me . It is the fact that im in a nursing home, with tubes and stuff. I had a deal with my old partner that if I got all banged up at work , we would kick the plug for each other when no one was looking. I had a work buddy that got shot in the head, he lingered for 7 years, not the way I want to go.

Do what I did - write an extremely restrictive health care POA.

E.g. not only no feeding tube, no IV antibiotics, but no antibiotics, period. Palliative care only.

Based on my personal experience taking care of an older relative who lost the ability to communicate during the progress of their disease.

But then had many life-threatening complications "cured" forcing them to live several years longer, essentially bedridden, with a terminal illness.

 

[athena53]

Do what I did - write an extremely restrictive health care POA.

E.g. not only no feeding tube, no IV antibiotics, but no antibiotics, period. Palliative care only.

Based on my personal experience taking care of an older relative who lost the ability to communicate during the progress of their disease.

But then had many life-threatening complications "cured" forcing them to live several years longer, essentially bedridden, with a terminal illness.

Wow- now I have to go back and look at mine, or at least write it more narrowly as I get older- I'm 64 now.

Please check my thinking. Pay entry fee at a Life Care CCRC (say 500k) in HCOL area and lock in your care for skill nursing and memory if needed. Monthly fees approximate current expenses.
You can get some of the entry fee refunded to heirs but you have to be willing to up the entry fee, otherwise, refund ability stops after 5 years.
My thinking is that we are basically ante upping up a fixed amount for prepaid LTC, getting life advocacy for care and access to a known quality of SNursing/Memory care.
Thx

That's what I hope to do at some point. It will involve relocating near DS and DDIL (3 hours away) so I'm not in a hurry to initiate that. I'll also make darn sure the place is solvent. This worked for my Grandpa and his second wife.

 

[meierlde]

10%? I thought the medical itemized is above 7.5% AGI if one is 65yo or older. While LTC may be needed before 65, many.. most? might be later in life.

I think starting in 2017 or 2018 the ACA raises the limit for seniors to 10%.

 

[Blue Collar Guy]

Do what I did - write an extremely restrictive health care POA.

E.g. not only no feeding tube, no IV antibiotics, but no antibiotics, period. Palliative care only.

Based on my personal experience taking care of an older relative who lost the ability to communicate during the progress of their disease.

But then had many life-threatening complications "cured" forcing them to live several years longer, essentially bedridden, with a terminal illness.

Wow, thanks this just went on my very short to do list. And now I know what palliative means I want extra .

 

[bingybear]

I think starting in 2017 or 2018 the ACA raises the limit for seniors to 10%.

I'm lucky to remember to rules of the day.. At 56 I really don't think LTC is coming any time soon for us. But I'm funding HSAs and investing them to help cover LTC/ health care in the later days