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How Much is Enough to Self Insure for LTC?
Old 01-04-2022, 12:04 PM   #1
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How Much is Enough to Self Insure for LTC?

We've had a great stock market run and a lot of threads remarking on how flush many of us are. The question arises as to what to spend that extra money on and my mind goes to that looming question of what is the final cost of exiting this world.

For those of you without LTC insurance, what reserve are you holding to fund LTC for a couple? Medicaid aside, as I don't want to have to go that route.
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Old 01-04-2022, 12:18 PM   #2
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I don't have a special LTC reserve. My situation is pretty simple since I'm not married, which bypasses the scary scenario of one person in LTC nd one in the home.

Right now I spend about $110,000/year. I figure that will cover LTC in my area (Midwest, LCOL). That spending will increase with inflation, of course, and so will LTC costs. I figure that if/when I enter LTC I'll sell the house (currently about $350K worth of equity in it) and my other expenses- car, clothing, dining out, travel, etc.- will go to zero or decrease substantially.

So I'm not doing anything special other than not buying a boat or a plane and planning to stay single unless the guy can fund his own LTC.
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Old 01-04-2022, 01:23 PM   #3
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We look out our paid off home as more than enough. If one of us needs long term care the other can either take out a HELOC, or sell and downsize to a smaller, more manageable condo. Given the crazy prices in SoCal, it's way, way way more than we need.

I look at MIL as an example. She is spending down her assets. When she first went into memory care DH (guardian) sold her home. The expenses are about $25k/year after her pension/SS. She's in year 7 or 8 of memory care. Her blood pressure and cholesteral numbers are good. She's shrinking (literally) but still pretty healthy despite dementia.

Remember, SS/pensions/ etc don't go away when you enter LTC... and can/should be applied towards the cost.
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Old 01-04-2022, 01:24 PM   #4
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Single and, like @athena53, no special reserve for LTC.

My Dad is 86 and in independent living. I was surprised when I called to find out that assisted living is essentially the same price as his current place for the basic rent, and $1K per month per ADL above that. In other words, not as expensive as I thought.

Most people in my Dad's place are only in assisted living for a year or two. The one exception which I usually mention is some Alzheimer's people end up in a situation with a healthy body but an addled brain. Memory care is more expensive than assisted living care, and a person who is in that state can live 7 to 10 years.
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Old 01-04-2022, 01:26 PM   #5
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I've mentioned this before, having seen it first-hand: A $120K LTC bill is not entirely additive to your regular expenses.

I've seen the healthy spouse radically change his/her lifestyle as well. No more expensive trips, eating out, two cars, second home, boat etc. Instead, you spend most every day at the LTC facility, eating a sandwich, holding the hand of the sick one and waiting for God to do His thing.

As a result, your normal spending is cut by maybe $50-75K a year, recognizing that, statistically, this could also be no more than a 3 or 6 month proposition. (waiting now for the comment "my aunt was in a LTC for 8 years"). So in many cases your total annual outlay could be about $50K more than your usual expenses.

Having said that, a lot depends upon your usual, normal expenses. If you usually spend $30K a year, my observation doesn't help you much but for many in HCOL areas with a higher cost lifestyle, it may be relevant.

In answer to the question, we are not planning on the expense and instead if/when the time comes we'll just pay out of pocket.
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Old 01-04-2022, 01:52 PM   #6
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According to Consumer Reports,"more than half of today’s 65-year-olds will require long-term care at some point, at an average total cost of $138,000. Most will need help for less than two years. But one in seven Americans turning 65 today will face more than five years of disability, with potentially dire financial consequences."

When I play around with my spreadsheets, I mentally put aside $500K for LTC for two. Not everyone will need LTC and most stays are under two years. But we'll probably not spend down to that anyway, plus we have a lot of equity in our house for the kids to rent or sell if we both ended up in LTC for many years, and our pensions and SS income will keep coming in, so I think we're covered under 99% of the likely scenarios. Our house is getting to be a lot of work for two, if just one of us went into LTC the other would move to a lower cost condo or townhouse and rent or sell the current house.
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Old 01-04-2022, 02:21 PM   #7
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I earmarked $500,000, $250,000 for each of us. Outside of home equity. I don’t want to have to sell the house to fund LTC if only one of us needs it.
My FIL was paying $8000/month. Average stay is about 3 years. So that about gets us there.
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Old 01-04-2022, 02:47 PM   #8
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I'm looking at about two years of retail LTC rates. I think somewhere on this forum a few years ago it's mentioned that two years is the median time people do in LTC. That number can be increased a tad as they can keep people alive longer as time goes by but I don' see it changing all that much. And that assumes it's my last nickle but I will more than likely have additional funds remaining if it extends.
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Old 01-04-2022, 03:02 PM   #9
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I won't be funding any cots for a LTC facility. If I truly can't get by on my own then it's not worth going on. The cost of a bullet isn't much and will take care of the probelm.
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Old 01-04-2022, 03:03 PM   #10
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I'm not sure, but doesn't LTCI have a maximum benefit? So whatever that would be is how much one would need to self-insure. It may not be enough if you need many years of LTC, but insurance wouldn't be enough either. I would assume if there's a policy with no max benefit it would be very expensive. I suppose at 60 I should be looking into this more closely now. I don't know if family history of Alzheimers would hurt me. I'm leaning toward self-insuring anyway but that's not a fully-educated decision.
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Old 01-04-2022, 03:12 PM   #11
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Quote:
Originally Posted by athena53 View Post
I don't have a special LTC reserve. My situation is pretty simple since I'm not married, which bypasses the scary scenario of one person in LTC nd one in the home.

<SNIP>

.
If you want to talk "scary scenario" think TWO people in LTC! Very rough calc. is that LTC is around $10K/month so that's a $QuarterMill per year for two.

We DO have LTC insurance but it's limited so I too have run through the mental gymnastics of how long my generous portfolio would last at that rate. It's not as long as you might think - especially since LTC costs are going up way FASTER than general inflation which is, what(?) 7% now?

I haven't gone any further in my thinking than this as it's too stressful. I saw both parents pass in a nursing home and it wiped them out (20+ years ago.) YMMV
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Old 01-04-2022, 03:13 PM   #12
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I don't have a specific bucket set aside with an exact mount. I do figure approx $250K if needed, but it's all part of my long term invested funds. If I ever got in a real pinch, there is house equity that could be tapped if needed.
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Old 01-04-2022, 03:15 PM   #13
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Many assisted living facilities have a mix of self pay residents along with Medicaid. Typically, the ALF requires the prospective resident have funds to pay the full rate for 3 years, then if the finances fail, they take Medicaid. Impossible to know if this will continue. I suspect yes, simply because not many people have all the money needed to fully finance this care indefinitely.

Rodi makes a good point about pension income paying part of the cost.

How much to save or set aside can vary. For a married couple, the cost for LTC for first spouse is higher because the second spouse still lives at home or pays rent, still has normal monthly living expenses, and the spouse in assisted living has personal expenses not covered by the ALF. Id say the house as a plan to finance LTC is good for the second spouse, not the first.

As for the duration, my mum just turned 96, suffers from cognitive decline and now physical decline. Shes starting her 7th year in an assisted living facility. I think 3 years average includes people who are in poor physical condition. People who have taken care of their health should expect to spend more years in LTC.
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Old 01-04-2022, 03:47 PM   #14
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We will most likely relocate from Puget Sound area to Arizona for the warmer weather and increased options for a nice facility that offers the ability to transition from independent living to assisted care to LTC. We will use $ from sale of (mortgage free) home and if needed DHs TSP account. We use my IRA to help fund current retirement expenses. I anticipate DH will need the assistance before me even though we are the same age. So, the facility will need to offer activities for me and assistance I cant provide for him. Hopefully 10+ years before we pull the trigger, so things could change.
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Old 01-04-2022, 05:00 PM   #15
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For us, current travel expenditures are likely a bit more than LTC for one. Cutting back on that, plus what could be SS income of near equivalent level to our travel costs (getting more comfortable that we'll get something from the program, although likely not as much as promised) and willingness to sell property/house, and go to more of an RMD spend path (rather than sustainable withdrawal), should easily fit the bill.

I think one of the most individualized issues in retirement/financial planning, which is saying something.
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Old 01-04-2022, 05:45 PM   #16
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Many assisted living facilities have a mix of self pay residents along with Medicaid. Typically, the ALF requires the prospective resident have funds to pay the full rate for 3 years, then if the finances fail, they take Medicaid. Impossible to know if this will continue.
Bingo. That's why I am looking at two years. (Note to self: See about making that three years) I figure if I beat the 50% of people who go past 2 years and I don't have anything left, they can take the pension + SS and medicaid can cover the difference.

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I won't be funding any cots for a LTC facility. If I truly can't get by on my own then it's not worth going on. The cost of a bullet isn't much and will take care of the probelm.
I cut that line from my first post. Thought to would be too controversial. But we might not have the luxury of a scary diagnosis and plenty of time to "address" the problem. A fall. A stroke. Or just that traffic accident that could have crippled us permanently at 30 but didn't, happens at 70 instead
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Old 01-04-2022, 06:01 PM   #17
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It cost my parents ~130k yearly currently for 24/7 home care for my DF and that is after insurance reimbursement.
Could get very expensive in the long run.
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Old 01-04-2022, 06:48 PM   #18
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Every situation is different. Just walked in the door from my DM's nursing home. She is moving from the hospital to the nursing home as I write this. Days 0-20 totally free (insurance pays), days 20-100 = $186 fee. Full boat after day 100 at aprox $6600/mo. She pulls in $3350/mo via pension and SS. She has about 15k in her accounts now. I figure roughly 25K in her account before we have to start paying. No out of MY pocket for aprox the first 8 months then I will need to cover the ($6600-$3350=$3250) per month going forward. She is 90.25 now. Just shy of 91 when I need to start paying. Most 90+ yr olds don't last too long in a nursing home. I can easily cover the extra when the time comes. Longest lived relative ever in our family was 87 up until now. Hard to imagine my mother making it much past 91. We'll see. DW and I will self fund.
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LTC plans
Old 01-04-2022, 07:09 PM   #19
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LTC plans

Let me point out another irony about LTC (based on experience)
You want your parent or other family member in the best nursing home.
You know, consistent nurses that know residents, doctors available, good food.
This quality of care extends life expectancy.
So plan for more than average time if your loved one is in a good nursing home.

DH and I self insure with about $300,000 in a Roth, so the spouse at home is not stuck with big tax bill for funds out of a tIRA.
YMMV
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Old 01-04-2022, 07:16 PM   #20
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Quote:
Originally Posted by SecondCor521

My Dad is 86 and in independent living. I was surprised when I called to find out that assisted living is essentially the same price as his current place for the basic rent, and $1K per month per ADL above that. In other words, not as expensive as I thought.

Most people in my Dad's place are only in assisted living for a year or two. The one exception which I usually mention is some Alzheimer's people end up in a situation with a healthy body but an addled brain. Memory care is more expensive than assisted living care, and a person who is in that state can live 7 to 10 years.

The thing to watch with assisted living are all the add on costs beyond the basic fee. Need medication management? Another $650/month. Laundry? $150/month. Weekly cleaning service? $200/month. And so on. These are just guesses and not exact prices, but having gone through parents in independent living, assisted living, memory care and nursing care, you have to checkout all the extras.
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