Long Term Care

[Running_Man]

Quote:

Originally Posted by MrLoco My wife and I were in a similar situation to yours last year. We actually have about a million more as far as invested assets go and we still purchased a long term plan. Why? As a hedge. Do not get "lulled" into this notion of "self-insuring," because I used to think the same thing. "We have plenty of assets to help pay for LTC costs years from now." (We are 59 and 58). First off....stay away from the newer hybrid LTC plans. These are usually a single premium payment policy (usually between $50,000 and $100,000) and are nothing more than life insurance policies with a LTC rider. Not worth it. Do your homework and try for a traditional LTC policy. Yes premiums could and probably will increase. But do you know how much a private nursing home room will cost in 25 years? In my state about $20,000/month. Now imagine you and your wife are in a skilled nursing facility at the same time. And yes your investments will grow over the next 2 decades....but why not hedge a little and have a little insurance to help pay these costs? This is what we did. We purchased a policy that covered both of us with a 180 day elimination period which will still only cover about half of the monthly cost of LTC. My thinking is that if we need it at least we will get some help. If we never need it at least we did not overpay. Consider also, some spend a decade or more in a memory care center. One of the details of our policy that we really liked is that any amounts our plan pays for LTC; we can shield if we ever needed to apply for MEdicaid. This is a state operated initiative "partnership program." We would probably never need this but it is a nice option to have to protect assets for future heirs. Again I see LTC policies as a hedge. I paid off my mortgage 15 years ago yet I still carry homeowner's insurance. I could easily pay to rebuild my house if it burned down....but the insurance gives me peace of mind so I pay for my homeowner's policy. The one problem I see you having is that the "sweet spot" to purchase a LTC policy is between 58-63. Beyond this the premiums become very expensive. Also, only 50% of applicants are accepted. Be prepared to give all details and permission to access your medical records. Acceptance is no sure thing. Good luck whatever you decide.

How much are we talking about for a premium that would cover two people at 20K per month each? I see $6,400 a year for a policy that covers $6,000 a month for 5 years if you triple that to $19,200 per year and assume a 3% real return by age 80 you would have over 600K in today's money. And that is assuming there are no increases in premiums over 22 years. Maybe there are policies that are more affordable but it seems quite daunting to me.

[HI Bill]

Since your expenses (after the next couple of years) are covered by your income, not touching the ~$4.5M in assets, I see no reason to purchase a LTC policy. Even if one of you needed LTC for 15 years, 15X$100K/yr = $1.5M. Highly unlikely, but it does happen. What I would consider is buying a luxury apartment in a care facility that starts out with independent living (with some luxuries such as in-house meals options, rides to doctors, etc.). These can be luxury type accomodations, and they eventually might transition you to assisted living, etc. I have friend who's put a deposit down on such a place, as there's a multi-year waiting period.

You made no mention of desires for preserving your $. If giving an inheritance or supporting a charity are important to you, you MIGHT want to consider LTCI. However, I'd look at the statistics on how long folks last under LTC. My mom had a policy for years, and as the prices increased, she was forced out. There was a waiting period, and a limitation of total benefits...all around a bad deal for her situation.

[Big_Hitter]

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Originally Posted by REWahoo Not sure the premium costs for a new policy today are a good value.

if you can get a new policy....

[Valid not Invalid]

Dad had the govt LTCIP. He couldn’t walk from the bedroom to the kitchen without stopping in the living room. Took him forever to fix a can of soup, just to sit down to eat it. When I tried to get him some help, the rep said as long as he could move the spoon from the bowl to his mouth he didn’t qualify for long-term care. They had six specific conditions before you could qualify to start receiving benefits and then the first 90 days was on your nickel. He received a hospice referral from the doctor and died on the same day. I wouldn’t give a dime for long-term care insurance.

[MrLoco]

Quote:

Originally Posted by Valid not Invalid Dad had the govt LTCIP. He couldn’t walk from the bedroom to the kitchen without stopping in the living room. Took him forever to fix a can of soup, just to sit down to eat it. When I tried to get him some help, the rep said as long as he could move the spoon from the bowl to his mouth he didn’t qualify for long-term care. They had six specific conditions before you could qualify to start receiving benefits and then the first 90 days was on your nickel. He received a hospice referral from the doctor and died on the same day. I wouldn’t give a dime for long-term care insurance.

Sorry to hear about your Dad. The six conditions you are referring to are the six ADL's ( activities of daily living). In order to qualify for care under a LTC policy; one must not be able to perform two of these: eating, bathing, dressing oneself, toileting, transferring, and continence.


The first 90 days is the elimination period. Usually, the longer the elimination period, the lower the premiums.

[MrLoco]

Quote:

Originally Posted by Running_Man How much are we talking about for a premium that would cover two people at 20K per month each? I see $6,400 a year for a policy that covers $6,000 a month for 5 years if you triple that to $19,200 per year and assume a 3% real return by age 80 you would have over 600K in today's money. And that is assuming there are no increases in premiums over 22 years. Maybe there are policies that are more affordable but it seems quite daunting to me.

Here is the thing. There is no reason to buy a policy to cover the full amount of future care. Doing that will probably be prohibitively expensive. Also, there is no reason to buy a policy with unlimited number of years of benefits. These are almost nonexistent.


My goal was to look for a policy that would cover a portion of future care and we would cover the rest through our investments.



Our policy from a superior insurer (AM Best Rated) costs $3,000 a year in premiums.
For this my wife and I each get 2 years of coverage and we get a 2 year shared pool of benefits. You can lower your premiums with a longer elimination period. You have options.
So one person could receive 4 years of care if needed.

Also, this includes a 3% CI (compound interest) rider. This rider is necessary to qualify for the partnership program which I explained in a previous post. By the time we are in our 80's; the benefit amount should cover about half the cost of care and we would pay the rest.
In terms of the hybrid plans that seem so popular. You cannot deduct the premiums on your taxes if you still ( or may in the future ) itemize deductions as you can every year with a traditional plan.


Also you can earn 3% on a short term investment grade bond these days. So $100,000 in a separate account pays your annual premiums.

Yes, premiums may increase in future years but so may interest rates.
And if we ever decide that future premium increases are too much , we can cancel the plan and haven't "lost" anything because we were covered for the time period we had the plan, as with any insurance. You can still have a stroke or become disabled or develop dementia in your 60's and need LTC. One of the deciding factors for me was a family history of dementia. My father "lingered" in a memory care center for 8 years.....with no insurance. Burned through hundreds of thousand of dollars.


Michael Kitces is an advocate of trying to find one of the few remaining decent traditional LTC plans and pay the annual premiums versus purchasing one of the hybrid plans and laying out $100,000 in one shot.
I agreed with him. Who knows?


But as mentioned before....don't stress too much about this because honestly many folks will not even qualify. My wife and I were lucky. We applied and were accepted in our late 50's. We were told that only 50% of applicants are accepted. Out of that 50% there are 3 categories of health grades given to applicants: Standard (highest rates); Preferred; and Utra (lowest rates given to only 15% of those accepted). My wife and I received the Ultra rating and this kept our premiums reasonable.


One thing I cannot stress enough is ; Do Your Homework. I killed a lot of trees copying a lot of info from various insurers. And you can always apply and go through the process and just see what coverage you can get at what rates if accepted. Good luck.