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

[Live And Learn]

Just curious how you invested that money you set a side ?

If in the general investment pool and not liquid non volatile assets what if we have an extended down turn and you need the money?

You may very well have it safe and isolated but most folks do not. It is just in their portfolios and they hope they don't need it at a bad point in time for their investments.

When you self insure one really needs to consider this fact.

That is a point i never thought about until money magazine did a story on us years a go and i said we would self insure

Overall I have 10% of my portfolio in Cash/CD's/iBonds which I totally exclude from calculations of my portfolio value and WR. This money would cover LTC or cash reserves during a downturn. It's also supposed to cover 4 bucket list vacations that are well beyond my normal travel budget (I doubt I'll actually take the trips - I'm not much of a traveler).

I'm betting that I don't need LTC at the same time there is a downturn. If it happens, it happens and my portfolio will deplete. I have a 3% WR at age 52. Is it enough ? I sure do hope so. The alternative is to go back to w*rk for "more cushion". You have to draw that line somewhere.

 

[FIYes]

I read every LTC thread with interest. We don't have LTC insurance so we are in the self insurance crowd...and probably more into the hoping for good luck, roll the dice crowd than I care to admit. My one concern is that one of us could end up needing extensive LTC and impoverish the other. I am not so concerned if the last to die blows through all the assets....don't have a desire to leave a large estate.

Given my concerns, why don't I got for LTC insurance? At this point I just don't feel good about any of the plans offered.


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[ripper1]

Years ago family members took care of the seniors. My mother and my aunts took care of my grandmother for her last couple of years. Nowadays people feel that they don't want to be a burden to their families and it seems like the younger generation nowadays don't want to be bothered with old people. I get lukewarm responses when I talk to my kids about us in our older age needing help. I guess it is the kind of society we live in nowadays.

 

[NoiseBoy]

I am single and I plan to self insure. First, by working until I am 55 to help increase the value of my megacorp pension. Second, if things are looking promising for a long life in my 60s, I plan to delay SS until 70. About 3/5 of my annuity income, once I do start SS, will have a COLA and a rough estimate is that it will be about $7,000 per month when I am 70. I should have a 7 figure portfolio too, so I feel like I can cover about 10 years worth of nursing home costs.

I think I have some market risk in my plan, but the highest risk appears to be from age 55 - 62 before I can start SS and a second DB pension from a previous employer. Is there any reason to consider buying an LTC policy for those years, with a plan to drop it later on? Do people buy disability insurance for when they are no longer working?

 

[CardsFan]

We are currently self-insuring, or rolling the dice, depending how you look at it. We do not have funds specifically ear-marked and conservatively invested for LTC, but our logic follows the lines of:
• We are both 60, and will both be retired by the end of this year, so our timeline is not as long as some others here.
• Expected WR (about 3.5%) in retirement gives 100% success per Firecalc, not counting the future benefits from social security. No pensions involved.
• 100% success means there is a high probability our funds will grow in retirement, not be depleted, and we will leave a nice sum of money to our son, or it could be available for LTC.
• Once we collect SS (@70), our WR will drop to less than 2%, virtually assuring our funds will continue to grow.
• We also have a cash cushion of about $300k not used in the retirement calcs. above.
• If I run Firecalc, include all cash and SS, and add a $70k off-chart spend starting in 10 years, we still get 100%. ($70k is the current median cost for Nursing home care in our area).

So, being an engineer, I look at this and wonder how many more levels of redundancy should we implement?

Like others here we would be interested in a reasonably priced catastrophic policy, but that does not seem to be available. And, if we could get a deal like Mathjak107, with total asset protection and unlimited spousal income allowance, that could also be a game changer. But for the time being we will take the risk that the market will not tank, and not recover, and at the same time we both are admitted to nursing homes, and we both require 10+ years of care.

 

[ChrisC]

We are just into our 60's and have pensions and ss that cover our basic needs and then some. We also have about 450k in retirement and taxable accounts. So I would safely assume that we can self insure.

We have these endless, it seems, debates about whether one should purchase the LTCi product, with those who decide not to purchase the product with resorts to the idea that self-insurance takes care of the risk or obviates the need or wisdom of purchasing the product. I buy insurance, any insurance product, for two reasons: (1) convenience of someone else handling an event that I'm insuring against and (2) transferring the financial responsibility of the cost surrounding an event that I'm insuring against to someone else.

I have enough money to "self-insure" or absorb the risk of virtually every major potential event in which my personal balance sheet would take a hit, but I wouldn't go naked or self-insure for those events. So, I might purchase disability insurance, professional malpractice insurance, flood insurance, travel insurance, home warranty insurance, or even in some cases "extended warranty coverage" for certain products. In my mind, this is all about risk tolerance and convenience. If I need LTC, someone else will be on the hook for that, though it might not cover everything -- it will cover a fair amount that I wouldn't have to pay. If I don't need LTC, I'll be very happy for that too even though I might have paid 20-30 years in premium payments. And in both cases during my lifetime, I have peace of mind in knowing I have this covered, with insurance and with my personal balance sheet to backstop that insurance as well.

 

[hnzw_rui]

Really don't have a concrete plan. I'm just trying to balance splurging on the occasional indulgence (ya know, just in case I get hit by the bus tomorrow or something) while trying to save as much as possible in the 457b and Roth IRA.

One problem is I expect to partially subsidize my parents' retirement. While they should be eligible for Medicaid, I'm gonna need significant assets to fund any LTC I might require while still being able to subsidize my parents' living expenses.

 

[bingybear]

Really don't have a concrete plan. I'm just trying to balance splurging on the occasional indulgence (ya know, just in case I get hit by the bus tomorrow or something) while trying to save as much as possible in the 457b and Roth IRA.

One problem is I expect to partially subsidize my parents' retirement. While they should be eligible for Medicaid, I'm gonna need significant assets to fund any LTC I might require while still being able to subsidize my parents' living expenses.

Just be careful in "intermingling of money" as you help them. If they need LTC and should be able to get medicaid, you don't want your personal money tied up in that calculation. I'm not saying don't help them. But do in it such a manner that medicaid sees your assets as potential funds for supporting your parent LTC. (i.e. making them not eligible for medicaid).

 

[hnzw_rui]

Just be careful in "intermingling of money" as you help them. If they need LTC and should be able to get medicaid, you don't want your personal money tied up in that calculation. I'm not saying don't help them. But do in it such a manner that medicaid sees your assets as potential funds for supporting your parent LTC. (i.e. making them not eligible for medicaid).

Definitely no plans to intermingle actual assets, funds and accounts. More like let them live with me so they have free rent, free utilities and reduced grocery costs.

 

[ripper1]

Everybody wants to find a way to insure or self insure. How many people have actually been to one of these places for one of their loved ones. They are pure hell holes. We had to put my wife's father there and it was the most disgusting place for a human being to have to spend their last days. Everybody talks about how to afford it. Forget it folks. Give me the magic pill.

 

[Newventurer]

Everybody wants to find a way to insure or self insure. How many people have actually been to one of these places for one of their loved ones. They are pure hell holes. We had to put my wife's father there and it was the most disgusting place for a human being to have to spend their last days. Everybody talks about how to afford it. Forget it folks. Give me the magic pill.

I guess it depends on what type of care facility you are talking about. They have become quite diversified these days. My mom entered an Assisted Living facility a few months ago and her LTC insurance pays $3000 of the $3500 per month for level 2 care (they give her her meds)

The facility is awesome, great meals, programs, staff. I eat with her a number of times a month and know most of the staff and other residents. All I have read makes it very clear that when a family is involved in their loved ones care, the quality of the care improves.

I don't discount that a nursing home, for when she has lost all ability to care for herself, may be a less desirable experience.

 

[Car-Guy]

Everybody wants to find a way to insure or self insure. How many people have actually been to one of these places for one of their loved ones. They are pure hell holes. We had to put my wife's father there and it was the most disgusting place for a human being to have to spend their last days. Everybody talks about how to afford it. Forget it folks. Give me the magic pill.

Yes, I've visited a few and not all of them "are pure hell holes". Yes, many probably are, but like so many things in life, if you have the money you can get pretty much anything you want. My MIL (an Alzheimer's patient) was in one the last few years of her life, and while it was expensive (~100k per year and that was 12 to 15 years ago), her privacy (important to her and us), care and level of service (most important to us) was actually very good.

OTOH, these places are not for everyone, even if you can afford a really nice one. If I can still think for myself when the time comes, I may opt for the magic pill too.

 

[mathjak107]

Everybody wants to find a way to insure or self insure. How many people have actually been to one of these places for one of their loved ones. They are pure hell holes. We had to put my wife's father there and it was the most disgusting place for a human being to have to spend their last days. Everybody talks about how to afford it. Forget it folks. Give me the magic pill.

the name of the game of insuring either self or insurer is to have a choice of in home care.

if you need medicaid you have no choice if they say you go to a facility.

the other thing is you need money to get in a private home since they offer few medicaid beds . however once in on your own money or an insurers they will take medicaid .

 

[Danmar]

Everybody wants to find a way to insure or self insure. How many people have actually been to one of these places for one of their loved ones. They are pure hell holes. We had to put my wife's father there and it was the most disgusting place for a human being to have to spend their last days. Everybody talks about how to afford it. Forget it folks. Give me the magic pill.

I guess it depends on the quality of home and the cost. Agree that gov't subsidized places are pretty grim. Even the home that my mother is in, is less than I would like, even though it is quite expensive ($100k/yr) My actual plan for my wife and I is to buy a big single story house or condo and ensure there is room for live in 24 hour nursing help. This will cost a lot but would certainly be less than our current expenses. I think the secret will be to not wait to long to set this plan up.

 

[audreyh1]

I guess it depends on what type of care facility you are talking about. They have become quite diversified these days. My mom entered an Assisted Living facility a few months ago and her LTC insurance pays $3000 of the $3500 per month for level 2 care (they give her her meds)

The facility is awesome, great meals, programs, staff. I eat with her a number of times a month and know most of the staff and other residents. All I have read makes it very clear that when a family is involved in their loved ones care, the quality of the care improves.

I don't discount that a nursing home, for when she has lost all ability to care for herself, may be a less desirable experience.

There is a huge difference between an assisted living facility and a nursing home. I think a lot of folks confuse the two.

I tend to believe that by using an assisted living facility you may be able to really limit the time in the more expensive nursing home.

If you are counting on your LTC to cover the cost of a facility, you have to "proove" that you need help. Here is the first round of arm wrestling with the insurance company, and many folks report difficulty with this stage.

If you are self-pay, then you can take advantage of the assisted living option whenever you feel ready, or your loved ones encourage you . And hopefully avoid issues living alone (falls, etc.) that might otherwise push you towards a skilled nursing facility.

There are also options of hiring care in your own home. Although this can also be tricky, because unsupervised care givers can take advantage of their clients so you have to be super careful about whom you hire.

 

[athena53]

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.

When I was younger, my grandmother tried to take care of her elderly father in their home. He'd always had a bad temper and with increasing senility it got worse. They had an old-fashioned house with no bathroom on the main floor so he had to use a toilet chair in their entryway. At one point they had to take away his cane because they thought he'd hit someone with it. Grandma ended up suffering a heart attack from the stress. DS told me years ago that he'd take me in if I got old and creaky. He was single at the time and I told him he couldn't make that promise for any future family members. I don't want them bathing me or dealing with my senility or incontinence if it comes to that.

Anyway, to get to the OP's question: I'm assuming DH won't make it into a nursing home or won't last long there due to health issues. He's 77 now. If I'm right about that, under reasonable assumptions I can withdraw enough money from my investments to cover what's needed. Since housing, auto, travel, utilities and other costs will go away at that point I won't have many expenses other than nursing home and OOP medical. I'll move to a place near DS and DDIL (they're 3 hours away) and hope they visit.

 

[Golden sunsets]

Well we are in the minority, having purchased policies in 2008. The premiums are in the process of a three year total 39.6% premium adjustment. Total cost for the two of us as of next year, the final year of this round of increases, will be $6,952/yr for both. This buys us 4 years each, at the current daily rate of $239/day. The inflation rider is 5% per year. The policy includes a partnership program which in our state protects additional assets equal to the cost of the facility payments made by the policy, so not as good as Mathjacks full protection of remaining assets. One good feature of our policy is that there is a cash payout feature that allows 40% payments of the daily rate to a family member who cares for the patient, with no questions asked, once need is initially proven. This payment only reduces the bucket of benefits on a dollar for dollar basis. The policy also covers in home care, using home health services, a feature which could lengthen both the time the patient can stay in the home and the bucket of money available. So the pool of money we each have as of this year is roughly $350,000. Our insurance agent sent us an update this year of what a similar product would cost if purchased today - $22,781 (for two) which I find hard to believe. I have just checked the per day skilled nursing home costs in our area and the median this year is $353 and the max(probably the facility that we would likely choose) is $409. Thus we would be self insuring for the difference. Assisted living facilities run $6,897/mo for the best facility. So all of this leads me to think that the future cost of an actual stay down the road would be exhorbitant given the annual increases we have been experiencing. We are in the category that articles on LTC indicate we can self insure (more assets than the upper threshold) but we can afford the premiums so we are sticking with them. I don't like it but there it is. I am always interested in this topic. Thanks OP for starting it.

 

[REWahoo]

Golden sunsets, who is the insurer?

 

[mathjak107]

Well we are in the minority, having purchased policies in 2008. The premiums are in the process of a three year total 39.6% premium adjustment. Total cost for the two of us as of next year, the final year of this round of increases, will be $6,952/yr for both. This buys us 4 years each, at the current daily rate of $239/day. The inflation rider is 5% per year. The policy includes a partnership program which in our state protects additional assets equal to the cost of the facility payments made by the policy, so not as good as Mathjacks full protection of remaining assets. One good feature of our policy is that there is a cash payout feature that allows 40% payments of the daily rate to a family member who cares for the patient, with no questions asked, once need is initially proven. This payment only reduces the bucket of benefits on a dollar for dollar basis. The policy also covers in home care, using home health services, a feature which could lengthen both the time the patient can stay in the home and the bucket of money available. So the pool of money we each have as of this year is roughly $350,000. Our insurance agent sent us an update this year of what a similar product would cost if purchased today - $22,781 (for two) which I find hard to believe. I have just checked the per day skilled nursing home costs in our area and the median this year is $353 and the max(probably the facility that we would likely choose) is $409. Thus we would be self insuring for the difference. Assisted living facilities run $6,897/mo for the best facility. So all of this leads me to think that the future cost of an actual stay down the road would be exhorbitant given the annual increases we have been experiencing. We are in the category that articles on LTC indicate we can self insure (more assets than the upper threshold) but we can afford the premiums so we are sticking with them. I don't like it but there it is. I am always interested in this topic. Thanks OP for starting it.

if we did not have total asset protection i would have not done it . that makes the policy worth it for the perks and not just the payout amount of the insurance.

i tried to see what other states offer total asset protection and not just a dollar for a dollar but couldn't find a list .

 

[akck]

Everybody wants to find a way to insure or self insure. How many people have Cactually been to one of these places for one of their loved ones. They are pure hell holes. We had to put my wife's father there and it was the most disgusting place for a human being to have to spend their last days. Everybody talks about how to afford it. Forget it folks. Give me the magic pill.

As has been said before, don't assume you'll be in a condition to take that magic pill, be it a FMJ one or something else. My father spent his last few months in a nursing home that had a waiting list. While it still is a well thought of facility, I didn't like that he shared a 4-person room, no privacy. My FIL, who is in his 3rd and likely final month (LTCi would not do him any good if he had it), is in an older facility that shows its age. What makes the difference is the care he's receiving. The majority of staff at my FIL's facility care about their guests. Many think of their guests as family and are truly interested in the final outcome. Many have said they're not doing it for the money (they deserve a lot more). Compare this to another facility in his small town (his wife spent a month in it), where the majority of staff just think it's a job to get to a better job.

This experience has made us realize that we need to do more planning well before we need the help. We'll be researching options, including CCRC's while we're still mobile. The key issue will be talking to staff and observing how they treat their guests.


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[Nunthewiser]

There is a huge difference between an assisted living facility and a nursing home. I think a lot of folks confuse the two.

I tend to believe that by using an assisted living facility you may be able to really limit the time in the more expensive nursing home.

If you are counting on your LTC to cover the cost of a facility, you have to "proove" that you need help. Here is the first round of arm wrestling with the insurance company, and many folks report difficulty with this stage.

Yes, this is all very true.

The case of my late mother went something like this.

She had a Genworth policy that paid $79/day for assisted living and $158 /day for skilled nursing. She had end stage COPD but lived OK at home until she was about 94 when she just couldn't walk very far without losing her breath, but was otherwise very healthy.

At that point, it would have been nice to either have her live with us, or go to an ALF. My wife and mom did not really get along too well (unfortunately), so reluctantly the best choice would have been an ALF. However, at that point, mom would have had to self pay as she was not sick enough to meet the Genworth criteria. But , all of us being frugal, we just let left mom home ( with visits every couple of days- we were an hour away)until she had a freak house wiring fire (not her fault) and she came to live with us until we figured out what to do. Within a couple of days, she got the first bout of pneumonia and was in the hospital. After that, she was in nursing home rehab (paid by Medicare).

By then we started the claims process as she was starting to lose physical ability. We really wanted to put her in an ALF as the cost would have been completely covered by Genworth. She was in an ALF for 3 days and then got pneumonia again, so back to the hospital. Once out of the hospital it was rehab/skilled nursing (again, Medicare paid), but she was really past the point of being minimally supervised as at an ALF facility. So, eventually we got Genworth to pay for the skilled nursing, but we were going to be co-paying about $80/day for what could have been months or even years.

Mom had good days and bad days at the nursing home, but she was getting weaker and about a week ago she slipped and broke her hip. Despite valiant efforts at the hospital (they fixed her hip), she developed c diff bacteria and urinary tract infection, and with the weak lungs, we just let her pass away painlessly a few days ago.

I thought the nursing home was something of a "hellhole". The nurses were indifferent, IMO and it would have been a very depressing experience, for me anyway. But my mom never complained (never, ever about anything, until she broke her hip). But it wasn't just that particular nursing home as we had visited all of them in the area and there was little difference.

I have to believe she would not have broken her hip had she been with us. That is not to say that she would have lived longer, though, as we might not have been able to know when she was getting pneumonia, or needed medication or doctoring that was available at the nursing home.

 

[Amethyst]

What is this magic pill people keep talking about, and how does one get it?
Not talking rat poison, are we?

YIf I can still think for myself when the time comes, I may opt for the magic pill too.

 

[hnzw_rui]

Here's an anecdote for a roll-the-dice plan:

Nine years ago, my grandmother decided to move to the Philippines instead of going into an assisted living facility (on Medicaid). She lived in San Francisco while we live in Los Angeles and my uncle in San Diego so there was no way we could afford to visit her frequently. Meanwhile, two of my aunts live in the Philippines as well as plenty of grown-up grandchildren.

My grandma was able to live quite comfortably on her modest SS+pension (along with help from my mom and uncle) while still retaining her independence. Wages for two caregivers (each one worked 4 days/wk) was ~$300-400 total per month. Unfortunately, she suffered a fall and broke her hip a few months ago before passing away last month (4 days short of her 90th bday). Following her fall, she gave up her condo rental and moved in with my aunt so my aunt can supervise her care. We had to hire two additional caregivers as well as increase their hours since my grandmother now needed help round the clock. For those last two months, total caregiver wages plus licensed physical therapist was ~$1,200/mo. My aunt asked around, a licensed nurse (40 hrs/wk) would have cost $700-1,000/mo but my grandma ended up not needing skilled nursing care. Still, that's a hell of a lot cheaper than it would have cost in the US.

All things considered, my grandma's plan to move to a lower cost of living country worked quite well for her. Not only did she enjoy almost 9 years of independence, she was also able to enjoy weekly visits from the various grandkids and great grandkids. The biggest uncertainty with her plan was medical costs since there's no health insurance and she had to pay for everything out of pocket. Her last hospital stint due to the fall was ~$1,500 for a 3-day stay. Granted, her plan likely wouldn't have worked all that well without her kids helping out.

 

[audreyh1]

We have these endless, it seems, debates about whether one should purchase the LTCi product, with those who decide not to purchase the product with resorts to the idea that self-insurance takes care of the risk or obviates the need or wisdom of purchasing the product. I buy insurance, any insurance product, for two reasons: (1) convenience of someone else handling an event that I'm insuring against and (2) transferring the financial responsibility of the cost surrounding an event that I'm insuring against to someone else.

I have enough money to "self-insure" or absorb the risk of virtually every major potential event in which my personal balance sheet would take a hit, but I wouldn't go naked or self-insure for those events. So, I might purchase disability insurance, professional malpractice insurance, flood insurance, travel insurance, home warranty insurance, or even in some cases "extended warranty coverage" for certain products. In my mind, this is all about risk tolerance and convenience. If I need LTC, someone else will be on the hook for that, though it might not cover everything -- it will cover a fair amount that I wouldn't have to pay. If I don't need LTC, I'll be very happy for that too even though I might have paid 20-30 years in premium payments. And in both cases during my lifetime, I have peace of mind in knowing I have this covered, with insurance and with my personal balance sheet to backstop that insurance as well.

The problem with transferring the financial responsibility to an institution/corporation, is that after taking all your money, they are likely to fight you paying out. Is it more convenient to pay the facility yourself, or fight with the insurance company to get them to pay out? I think your assumption of LTC insurance being more convenient or lowering the hassle factor may be naive. People have had real tough experiences with this very issue. I, personally, don't want to be fighting the insurance company. I don't trust health insurance companies.

 

[Walt34]

Everybody wants to find a way to insure or self insure. How many people have actually been to one of these places for one of their loved ones. They are pure hell holes.

Indeed, some are. And some are very nice and comfortable, and some are in fact luxurious.

My mother was in a CCRC for 11 years all but the last six months in independent living and assisted living after that. It was very nice. But I have seen some hell holes that I wouldn't wish on anyone.

FIL was in a very nice one in nursing care for 10 months and that was very nice too. Well, about as nice at one could hope for given his limits.

The institutions run the full gamut.