What do you all think is an asset value for self-insuring vs long term care? I realize it depends on your location to some extent (high COL area vs lower COL), current age, and also what total assets are. Just curious what is a good value to consider as part of the assets that can be assigned or delegated to LTC? Is $100k, $250K, or what is a good amount?
Sorry, but it really is too complicated to even give a ballpark estimate for "the number" you would need.
You can find estimates for the avg. cost of nursing home care in your area, let's say it is $250 per day. You specified "safe," so the very safest level would be enough to fund you and your spouse both checking in to a NH right now ($500 per day) and staying there for your normal life expectancy. Let's say that's 25 years (of course, it would be more complex than this--you'd really need to fund enough to cover the last person the die, which would be longer than 25 years). That would require $4.56 million dollars available on day one (assuming your starting nest egg grew at the same rate as nursing home costs). Now, as you get older your expected duration of the NH stays decreases, but your risk of needing the LTC goes up.
Obviously the above case is
very very unlikely to happen. Chances are very remote that either of you would live 25 years once you require LTC, and even less likely that
both of you would live that long.
As a practical matter, many people plan on self-funding 5 years of LTC. That's longer than the average person needs LTC (though some people do need it for much longer). The present lookback period for Medic
aid funding of LTC expenses is 5 years in many states, so these people are assuming that they will put most of their holdings in a trust as soon s they start needing LTC (and therefore out of Medicaid consideration, and available to fund the living expenses of the other spouse), then spend down their own money for LTC the next 5 years. At that point, they will have very few assets left in their own name outside of the trust, and if they are still alive they will throw themselves on the mercy of the State to fund their LTC for their remaining life. It's a risky approach, as laws can change (lookback could change to 10 years?), they might not find an good facility that accepts Medicaid for payment, etc . But it does serve to put a "cap" on the duration of LTC that would need to be self-funded. (Note--I am not a lawyer, the above is just a synopsis of what I believe might be the case).
Also, in the case of DW and I, the most "strenuous" case is if one of us is in a NH and other is still living in the big world. OTOH, if there's nobody living outside the NH, the house and most belongings can be sold to pay LTC expenses, there are no vehicle expenses, no home ownership expenses, etc.
Edited to add: Okay, here's a ballpark estimate (despite all I wrote before
):
IIRC,
most people require less than 3 years of LTC. Let's assume that is a nursing home, and in my location that would cost $250/day. So, we'd need $275,000 to fund that. If we go to 5 years (and depend on Medicaid after that, per above), then the number is $450,000. It doesn't matter if that care is required tomorrow or 30 years from now--
if we assume we can get investment returns that equal the increase in LTC costs. For the
second member of the couple, no additional "set-aside" is required because LTC costs out to 5 years (and probably a lot farther) would be covered by sale of the house and spend-down of the nest egg that was intended to cover regular living expenses during retirement. SS checks will also be coming in, they can help pay for LTC as well, helping the nestegg to last longer. So, in this very simplified case, (and taking some risk regarding the Medicaid rules and investment returns matching LTC costs), the couple would need to set aside between $275K and $450K to self-fund LTC. We can reduce that amount by any $$ in the nest egg that would not be required to support the SWR for a single-person household. Either way, self-funding (even if we take some risk) takes a big chunk of change. Too bad, as it >likely< won't be needed, but would need to be kept on hand even well into old age, so it will likely go unspent and become part of the estate. It sure would be nice if we could buy true LTC insurance that we could believe in.
