LTC -- how do you plan on covering this risk?

[MichaelB]

We are self insured. We have sufficient assets to provide for extended care for both of us in assisted living. At least I think we do - I think assisted living costs more than most people estimate.

 

[mathjak107]

What really got us thinking about our ltc plan was when my healthy co-worker fell off that ladder and broke his hip.

He had a paralyzing stroke during routine hip surgery . It is not even 2 years and his spouse went through almost 200k.

We realized while saying we would self insure we really had no plan in place to do just that .

having retired 2 weeks ago i am retiring at a point where a correction is possible.

If one of us needed long term care and we needed a few hundred k while markets are down over a few years the asset depletion early on would be awful for the other spouse

 

[akck]

I have an life insurance policy with a ltc rider.

And I plan on being a HUGE burden to my sons. after all the crap they put us through during their teenage and young adult years, I feel some type of payback is warranted.

As with many others I cannot stomach the ltc policies out there from what I've seen (primarily genworth) expensive, don't cover all that much and too unpredictable.

While we have threaten our sons the same way, the reality is we won't follow through and there's no guarantee they'd step up to the plate if we did follow through. Having stepped up to the plate after my FIL had several strokes, is not something we'd wish upon anyone. It's mentally and physically draining to be with him, watching him slowly deteriorate. My SIL's husband is going through the same thing with his mother and he says his siblings are doing little.


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[Fermion]

Delay taking SS until 70 is our plan. If LTC costs more than SS at 70 can provide, then the government can pay the difference.

 

[W2R]

We are self insured. We have sufficient assets to provide for extended care for both of us in assisted living. At least I think we do - I think assisted living costs more than most people estimate.

+1

Like many, I do want to stay at home as long as I can manage it. My "dream house" that I just bought six weeks ago, is not only gorgeous but also has a lot of features that make it unusually suitable for the elderly or disabled (the prior owner was both).

So, I'll stick it out here for as long as I can, then sell the house and as far as I can tell my nestegg at that point will cover the cost of a facility.

 

[2017ish]

If you retired in 2000 and had many many years of recovery back to where you were could your spouse continue to live without a severe budget cut if you had to come up with a few hundred thousand bucks for a few years of care and depleted that excessive amount of assets ?

I'm one of those self-financing. In our case, yes; we are taking a conservative course.

The majority of our anticipated retirement spending is targeted for travel. If equity portfolio gets cut in half and one of us goes into LTC, the other one can't travel much. Probably limited to domestic and Caribbean trips, unless we end up getting social security or an inheritance (both of which are excluded from planning right now, even though objectively we could probably include something). In that case, also, the acreage and house would likely go to the most interested developer and we/she would downsize--another thing that we haven't included in our numbers.

 

[Taxman59]

In 2002 I bought a LTC policy for DW and me, $150 per day, 5% annual simple inflation, no limit on benefits, 10 payments and total cost of annual premiums was about $4500 per year for both, paid with pre-tax funds through my employer. 8 years in, I got a rate increase to $5700 per year taking effect the month after my 9th annual payment was made. So I had 9 payments of $4500 and one payment of $5700. Now the policies are PAID-UP FOR LIFE!! and the daily benefit is now about $250 per day. My thought when I bought the policies was to insure the first $150 and self insure any excess.

I have been lucky with insurance purchases so far, an annuity with a guaranteed internal growth rate of 7% and the 10 pay LTC policy with no lifetime cap. I don't think I will press my luck much more though!

 

[bingybear]

He had a paralyzing stroke during routine hip surgery . It is not even 2 years and his spouse went through almost 200k.

We realized while saying we would self insure we really had no plan in place to do just that .

If one of us needed long term care and we needed a few hundred k while markets are down over a few years the asset depletion early on would be awful for the other spouse

mathjak107, question not just for you, but all. From another post in another thread, you noted the 200k was over 1.5 years which if evenly distributed would be about $365/day. Question is not just for you, but for all in general, "how would you cover this cost?"
For me: I got two proposals last year (before and after they change policies to be more valid from an actuary perspective). The second one had worse coverage so I will use that one. For me, I would have to pay approx 145k of the 200k bill. This is due to a 180 day elimination period and $150/day max. Since I did not actually process an application, I don't know if I'd be rated better or worse than the proposal. Since I did not vote LTCI, I would have to come up with 200k as questioned by mathjak107. My planned WR is 1.5%... but I do not closely follow it. With that much wiggle room covering $200k is doable.... but I don't really like parting with that much. It would blow the 1.5% WR for that period of time.

There is no real comparison between homeowner's insurance and LTC insurance.

For homeowner's insurance you are insuring for a specific policy period (usually a year). The amount of money is relatively small in part because of the short period of time being covered. You aren't paying $X to cover a potential loss to your house in 10 or 20 years or more from now.

Also, with homeowner's insurance you generally have a reasonably good chance of being able to pick an insurance carrier who will be there in the event of a claim. Sure, a carrier could go broke during the year but it is rare. With a LTC carrier you are hoping, again, that a carrier will be financially solvent years from now.

Very importantly, when you pay your homeowner's premium it is a set amount for the policy term (assuming no changes in the policy during the year). You don't get halfway through the year and have the carrier raise premiums. Sure, at the end of the year, maybe your premiums go up but you can simply move to another carrier if they do. Each year is independent.

LTC insurance is different. Your premiums may go up next year and you have no assurance at all that you can move to another carrier. You may have become uninsurable.

In many ways I agree with the not like comparisons of LTC and House insurance. One addition difference is it covers more than structure, it covers liability. Also if you have and fire, get it repaired, then have a tornado, the insurance will come back and repair that.
But lets take dental insurance (I know the logic here is baffling). The difference here is not the difference insurance type, but my perception of the cost of risk.
On cobra we were paying about $500/each for dental insurance that would pay a maximum $1k per year. They cover preventive care, but have a deductible beyond that. In some cases the agreed upon rates are an attraction. But if you typically just go in for a cleaning with a filling replacement every 5 or 10 years... why have the insurance? If you have a major issue, insurance only pays up to $1k total for the year. The amount of risk you are transferring is really minimal in my perception.

I think LTCI value has a lot to do with individual situations and the value offered in the plan. If you need it early, then it is likely a great buy. Each person needs to determine how much they are willing to pay for transferring risk. I encourage all to use mathjak107's $200k in 1.5 years example to see how their plan would work for them.

 

[bingybear]

In 2002 I bought a LTC policy for DW and me, $150 per day, 5% annual simple inflation, no limit on benefits, 10 payments and total cost of annual premiums was about $4500 per year for both, paid with pre-tax funds through my employer. 8 years in, I got a rate increase to $5700 per year taking effect the month after my 9th annual payment was made. So I had 9 payments of $4500 and one payment of $5700. Now the policies are PAID-UP FOR LIFE!! and the daily benefit is now about $250 per day. My thought when I bought the policies was to insure the first $150 and self insure any excess.

I have been lucky with insurance purchases so far, an annuity with a guaranteed internal growth rate of 7% and the 10 pay LTC policy with no lifetime cap. I don't think I will press my luck much more though!

I'd likely buy that plan if it existed today.

 

[Car-Guy]

Self insure. I don't trust the insurance companies in this area. There seems to be many variables/restrictions/hurdles and the industry is evolving. Cash is king and gives me a lot of flexibility if it's ever needed. I'm comfortable that I have enough cash, assets and income to cover whatever we might need or want.

 

[Koolau]

I voted LTC Insurance, but in reality, "self insure" is also true. At the rate LTC costs are rising, it is unlikely that our 5%/year increase will cover us. Also, our term is only 3 years so we could easily outlive the benefit. YMMV

 

[kcowan]

We have kicked around the idea of doing LTC in Mexico because of the lower costs for full-time residents. But so far no conclusions.

 

[daylatedollarshort]

We have kicked around the idea of doing LTC in Mexico because of the lower costs for full-time residents. But so far no conclusions.

I sent our adult kids this link:

The New Retirement Resorts - WSJ

"A growing number of intrepid retirees, wary of spending years in an assisted-living facility or staying at home, are opting for arrangements that provide them with a full range of services and a greater sense of adventure—fully staffed homes in Costa Rica, backyard bungalows on their children's property, so-called cohousing arrangements, full-time spa living and even serial cruises. "

LTC is more affordable in other countries. I don't know why the US has to be so crazy high. We can live in the EU so I have thought of that possibility, too. Even the UK is pretty affordable compared to the US -

Care home bills up 9.3% in two years: Average annual cost of room is now £28,367 | Daily Mail Online

 

[Walt34]

I voted "Other" because while we will self-insure while we can if things got really long term it isn't hard to envision running out of resources. So the plan is move to a CCRC in about 5 to 8 years and hopefully neither of us will need full time skilled nursing care.

However the only places that we would consider have policies that in essence say that you're expected to pay for care, if your resources are exhausted they won't kick you out and will eat the difference between what the costs are and what Medicaid pays.

 

[daylatedollarshort]

There are lots of unintended consequences that reality has shown that come up when folks say they will self insure and as our estate attorney says that usually means they have no
real plan . Then they come to see him after the fact.

Self insuring can work if you really have plan in place but most folks don't other than to just hope they don't need to pull huge sums of money at a bad time from the regular asset pool.

An article on Forbes has this to say about self insuring:

"Self-insurance. Some experts are suggesting foregoing it altogether. That makes the most sense in two opposite situations. One is if you have very little assets to protect. In that case, it may not make sense to pay for a policy since Medicaid would become your plan. The other is if you have so much assets (around $2 million or more), that you can pay the expenses out of pocket.

The Biggest Threat To Your Assets - Forbes

Like Rodi, if one of us was in a nursing home the other one would probably sell or rent out the current house. It would be too big and too much work for one person anyway and retirement communities where we live are relatively cheap compared to traditional housing.

 

[HFWR]

My LTC costs ~ $1500/yr, so an outlay of $30k from now until I'm 81 (discounting opportunity costs...). At that price it's "worth" the coverage. If rates go up much, I'll reevaluate.

 

[DEC-1982]

For LTC specifically, if our money actually runs out we will depend on our kids. I am not sure but I think this is the way humans have done it for a long time, although humans died at an earlier age in the past.

 

[daylatedollarshort]

Here is another take on what asset range has the highest probability of benefiting from LTC insurance:

"Although Medicaid laws and limits are given here for illustrative purposes only and are subject to change and interpretation, understanding them does help explain many experts’ contention that there is a narrow window of wealth that should determine a couple’s need for long-term care insurance. At the bottom end, if non-home, non-car assets are below $115,920, Medicaid will kick in to fund the partner who needs long-term care. At the upper end, if non-home assets are above about $700,000, a couple can self-fund most nursing home stays without depleting assets. It is those whose wealth ranges from about $150,000 to $700,000 who have the greatest need for conventional long-term care insurance."

From a PBS online article:
Insured for old age? An economist explains the dangers of long-term care insurance

 

[kaudrey]

We are similarly situated to Katsmeow (or will be, when we retire) - "We are self insuring. We are really in the sort of in the middle group... That is, enough assets to want to protect them, but not so many that it is easy to self insure. We are in that group of people that is the theoretical market for long term care insurance."

 

[Fermion]

Another option when faced with extreme LTC is to just go to Vegas and make one or a couple big bets. If you win, pay for the LTC yourself, if you lose, declare bankruptcy.

Seems about the same gamble as paying $$$ every month for insurance which may or may not even be any good when you need it.

 

[REWahoo]

My LTC costs ~ $1500/yr, so an outlay of $30k from now until I'm 81 (discounting opportunity costs...). At that price it's "worth" the coverage. If rates go up much, I'll reevaluate.

Our two LTCI policies cost us under $1,200/yr combined for the first 14 years, now the cost is up to $1,750/yr after a 50% increase last year. Still think the coverage is worth keeping, but if/when the rates go up again I'll take another look at it. After all, it is insurance, not an investment...

 

[mathjak107]

Here is another take on what asset range has the highest probability of benefiting from LTC insurance:

"Although Medicaid laws and limits are given here for illustrative purposes only and are subject to change and interpretation, understanding them does help explain many experts’ contention that there is a narrow window of wealth that should determine a couple’s need for long-term care insurance. At the bottom end, if non-home, non-car assets are below $115,920, Medicaid will kick in to fund the partner who needs long-term care. At the upper end, if non-home assets are above about $700,000, a couple can self-fund most nursing home stays without depleting assets. It is those whose wealth ranges from about $150,000 to $700,000 who have the greatest need for conventional long-term care insurance."

From a PBS online article:
Insured for old age? An economist explains the dangers of long-term care insurance

We couldn't pay our bills on 700k generating our income even without trying to pay 120k a year for long term care

 

[Katsmeow]

Here is another take on what asset range has the highest probability of benefiting from LTC insurance:

"Although Medicaid laws and limits are given here for illustrative purposes only and are subject to change and interpretation, understanding them does help explain many experts’ contention that there is a narrow window of wealth that should determine a couple’s need for long-term care insurance. At the bottom end, if non-home, non-car assets are below $115,920, Medicaid will kick in to fund the partner who needs long-term care. At the upper end, if non-home assets are above about $700,000, a couple can self-fund most nursing home stays without depleting assets. It is those whose wealth ranges from about $150,000 to $700,000 who have the greatest need for conventional long-term care insurance."

From a PBS online article:
Insured for old age? An economist explains the dangers of long-term care insurance

That's interesting. If I go by that then we would be in the upper end. The numbers above are lower for self-insurance than I've seen before.

 

[jimnjana]

I voted that we would self insure. Prior to retiring we explored the Fed Group LTC but DW was denied. We had been paying on two whole life insurance policies with a LTC option which we calculated would make up the difference between what LTC would cost and what pension and SS benefits could cover. Several years ago we dropped the whole life polices and now will rely on our investments to make up the difference.

 

[Koolau]

For LTC specifically, if our money actually runs out we will depend on our kids. I am not sure but I think this is the way humans have done it for a long time, although humans died at an earlier age in the past.

I know this is the way it used to work. But I know of no one doing this now - at least not at the "skilled care" level. Perhaps, as in Hawaii, mom and dad live with the kids and kick in their SS for expenses. But if mom/dad need constant care, few families today are up to providing that level. I just can't picture how that would work out in today's world. Do the kids quit one of their j*bs and stay home to care for mom and/or dad on a full time basis? Do they pay for mom and/or dad's stay in the care home at ($5000 to $8000/month)? While this WAS the model, I don't see it happening in the "western" world.

We joked with our youngest that we were going to move in with her when we got old and decrepit. She retorted that she would find us a travel trailer instead. Very funny - or not. YMMV