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

[bingybear]

I've seen a number of posts on LTCI.
How rates are rising.
How its not affordable.
How insurance companies are getting out of the business.

I'm wonder what your plans for covering this risk... if at all.

I've let an other category of other for option I have not sorted.
If you're self insure, how do you plan on structuring this.

I'm hoping this is a useful learning thread.

 

[Independent]

I was just thinking about a poll like this.

I think marital status is a big variable. If I were single, I could say that if I move into a facility I can sell the house, that would provide nn months of care. And, I could use most of my regular income, so I only need the excess of the cost of a facility over my income. And, if I impoverish myself and eventually use Medicaid, that's just life.

But, I'm married. If one of us moves into a facility, the other still needs a place to live. An earlier poll about Survivor Spending said that many people here think that survivors will spend nearly as much as the couple, so that implies very little income is available.
And, if the first person impoverishes the couple, the second has an unattractive life.

I'm thinking that it may be time for us to carve out a block of assets for LTC and keep it away from spending money. The investment returns on those assets will (initially at least) just keep the asset value growing at the rate of LTC costs.

 

[Senator]

I will very likely self insure, even though my father was in a nursing home for 5+ years at one of the highest level of care.

Medicare covers the first 30 days for 'free'. The next 60 days or so used to be a co-pay of $99. After that, my assets can pay. I do not have any one to leave them to, so I guess they are fair game.

Nursing care prior to age 65 I believe is part of regular healthcare. So I do not think i need to worry about nursing care for a while.

I also believe the VA will take care of me at some point if it comes to that.

It could also be that the government mandates nursing home care by the insurance companies by the time I get that age.

 

[Katsmeow]

You might find this poll and thread that I started two years ago interesting:

http://www.early-retirement.org/forums/f28/ltc-poll-67962.html

There were over 100 replies to it which really helped to clarify my own thoughts.

We are self insuring. We are really in the sort of in the middle group that I referred to in that thread. 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.

However, the flaws with the insurance product just make it unappealing. A really big factor is that most policies (at this time) cover only a few years of expenses. That is the risk we are able to cover. The bigger risk is someone being in a nursing home for years. That is not very unlikely, but does happen (DH's mother was in a nursing home for about 8 years). However, most current policies won't cover many years of care.

Again, I would like to like long term care insurance, but just find the product flawed.

 

[Animorph]

We should end with enough left in the portfolio to cover LTC if necessary. The normal 4% SWR scheme will result in a large surplus at the end in most cases. So that's pretty much our LTC. No specific target amounts.

 

[pb4uski]

I'm self insuring, in part because any LTC proposals I have looked at the costs seemed excessive compared to the benefits and I continue to be concerned that they will increase premiums. Depending on what our needs are we should have enough.... but if the worst happens and we blow through our HSAs and other resources then reverse mortgaging the house to pay nursing home costs would be Plan Z.

 

[REWahoo]

Here is my LTCI story, and I'm sticking with it...for now:

http://www.early-retirement.org/forums/f28/ltc-insurance-premium-surprise-49854.html

 

[bingybear]

The plan right now is to self insure. I just can't swallow the present policies I've looked at. The amount of payout is so limited based on the initial premiums.

Present plan is to partially fund using a small existing HSA and fund it for the next 10 years fully. These funds will be invested.

Using after tax dollars for the the HSA will allow us to roll more T-IRA to RIRAs (up to the top of the 15% marginal tax rate. Taxes will be paid with after tax dollars. Part or all of the RIRAs could be used for LTC if needed. -- I expect the HSA method could fall short of fully funding LTC for both of us.

LTC expenses paid by the HSA should be tax free.

 

[rockyj]

I voted self-insure, as that seemed the best fit among poll options for our case (aspects fo several apply).

LTC insurance is not a product I expect to ever buy on it's own, for shortcomings pointed out above and in other threads. Life insurance could provide one piece of our puzzle depending on how things play out. We also will likely look into buying into a progressive/continuing care commmunity at some point should that make sense, which I guess is a form of insurance. There's something of "winging it" in below as well.

For now:

1) An existing whole life policy offers a hedge against LTC costs for me only. Should I need care prior to death and DW survies me, we would pay for that care from assets and the policy would replenish the kitty for her for about 4 years LTC expense at current local rates (something less in an inflated future).

I have given some thought to doing something similar with permanent insurance for her, but have not done so yet, and may not, depending on costs.

What I like about life insurance covering part of this need as compared to LTC insurance, is that costs/benefits are much more predictable, and either spouse or estate will get a known benefit from the product and premiums paid, regardless of whether any time is spent in nursing home or utilizing covered in-home care. Sure it's a costly and partial solution, but LTC insurance is a less predictably costly and partial solution, too (given benefit limits). Life insurance does require out-of-pocket coverage first, however.

2) We have a non-cola'd pension - 100% to survivor - that represents about two-thirds of LTC cost at current local rates.

3) We expect that social security, between the two of us, will represent about one-third of current LTC cost for one. Social Security will reduce by about 1/3 for surviving spouse due to loss of spousal benefit.

4) Surviving spouse could live on pension and survivor SS if at home, or use it to cover substantial portion of any LTC costs he/she may incur in the end game.

5) Given the partial coverages above, we expect to have sufficient assets to cover remaining LTC costs, if they are needed.

6) Home equity is not included in above and could cover a few years for the last to go if needed, too.


So, depending on the order of events the reulting LTC funding mix could be:

1) Funded through assets and partially/completely reimbursed from life insurance for surviving spouse after death.

2) Funded through assets only, while other spouse lives on pension and SS.

3) Funded through pension, social security, and assets for second to go.

4) Handled through buy-in and benefits coordination with a progressive car facility.

5) If we end up with concurrent very long term stays, without other prior arrangements in place, we may become wards of the state (Medicaid).

 

[fh2000]

Our plan is to withdraw 4% from assets for 35 years. Our 2 houses with total equity of $750K less tax, will be our LTC. We hope that is enough.

 

[landover]

I guess taking SS at 70 can also help surviving spouse if self-insuring?

 

[MooreBonds]

I will be self-insuring. If there were a product that had a 2 year waiting period then I would take a serious long hard look at it.

It's interesting how people appear to think LTC companies are out to screw them over just from the premiums. As an example, my homeowner's policy provides $250,000 of coverage in the event my house has damage or suffers a complete loss. There is also a little liability coverage thrown in, but it runs about $800/year. And that was the cheapest quote among other insurers.

How often do you see a house suffer a significant % loss?

Extrapolated to LTC, I'm surprised that they ever even started premiums as low as they did (I guess to tease people in so they would drop the policies later when they repriced to more normalized premium levels?)

You could easily get to about $250,000 in LTC costs for an individual over 2 years time with full-time care. Depending on which graph or study or survey you believe in, 2 years of expenses could represent a relatively large minority % of the population. Far, far higher than the number of homes that go up in smoke in a fire, or due to mudslides, or demolished in a tornado or hurricane, etc. Yet, if you were to compare the premiums, my guess is that you'd find LTC to be comparatively cheaper than your homeowner's insurance in many cases.

 

[Ian S]

I may consider giving my family instructions such that if something happens, they arrange for my return to Canada where I was born and still retain citizenship. Nursing home care is subsidized there.

 

[akck]

The retirement plan at work offered a group LTCi policy at retirement with no exam and premiums based on age at retirement. Since it's a group plan, there hopefully won't be as many problems as with individual private insurance policies. If I was single, I'd definitely self-insure but there is no way the one not in a care facility could live and pay for the other's care. So I went ahead and signed up for LTCi for both of us when I retired, even though my wife is still working (she's in the same retirement system as I), so her premium is less than mine. When one of us passes, the decision to continue the policy will depend on how healthy the remaining spouse is.

While premiums can increase, I'm hoping the group nature of the plan will limit them. Also, since it's a state worker retirement plan, changes will go at the speed of government.


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[Rick_Head]

I answered "roll th dice". Maybe "self insure" would have been better since I can likely afford it. However, if I'm able (I'll be willing) it's possible LTC won't be required.

 

[rodi]

As I've said in other discussions here our paid for house is our LTC insurance. The community spouse could downsize quite comfortably and still pull out multiple hundreds of thousands of dollars to be used for LTC coverage. That's one small advantage to an overpriced real estate market.

 

[daylatedollarshort]

According to Consumer Reports, "The Center for Retirement Research at Boston College estimates that although 44 percent of men and 58 percent of women currently age 65 will need nursing home care at some future time, stays will average less than a year for men and less than 18 months for women."

We'll self insure. The look back period is 5 years for Medicaid and most people do not stay in nursing homes that long anyway. If we both ended up in nursing home care for years and years on end, we'd eventually do what most everyone else does anyway - go on Medicaid. This would be after we hire a clever elder attorney and transfer as much of our NW to the adult kids as possible before we deplete our assets and run out the look back period time clock.

 

[Katsmeow]

It's interesting how people appear to think LTC companies are out to screw them over just from the premiums. As an example, my homeowner's policy provides $250,000 of coverage in the event my house has damage or suffers a complete loss. There is also a little liability coverage thrown in, but it runs about $800/year. And that was the cheapest quote among other insurers.

How often do you see a house suffer a significant % loss?

Extrapolated to LTC, I'm surprised that they ever even started premiums as low as they did (I guess to tease people in so they would drop the policies later when they repriced to more normalized premium levels?)

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.

 

[big-papa]

We have bought LTC insurance. Almost no history at all in my family, so coverage is less for me than my wife. My wife's mom, her twin sister, her mom's brother and associated other relatives all had Alzheimer's. Her Mom was in an Alzheimer's unit for several years, then when it progressed past a certain point, was in a regular nursing facility. We're with NYLife. They had a 30% increase in TX last year. I made an adjustment downward on my policy and modified the inflation protection on both policies which absorbed the bulk of the increase. Someone posted in another thread that after a number of years, they dropped the inflation protection altogether and self-insured the delta. Always an option if one's portfolio support it at some point in the future.

 

[mathjak107]

self insuring would be our last resort for many reasons .
We would only self insure if our ltc premiums went up much more.

The biggest reasons are that having that money invested can leave you with only a piece of it if we have an extended downturn.

Just like an insurer if you really are self insuring that money has to be conservatively invested where it is safe , secure and consistantly there.

That means a big chunk in low yielding investments. That being the case we can invest more aggressevely , pay the premium with a piece of those average gains and be a head.

Trusts will be needed self insuring if medicaid after look back is the plan. That will cut the stay at home spouse off from the assets in the trust. By law she can only get 5% of the principal and what they consider gains without filing a hardship request.

Many times the spouse in the home does not get the best of care as the stay at home spouse trys to cut corners and preserve the money for their own survival.

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.

 

[bclover]

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.

 

[mathjak107]

We would only have taken the linked benefit route if we did not qualify for a regular plan.

Without inflation increases the linked life policy would likely have come up way short of funding anything meaningful.
Those policy's have no inflation adjusting.

To get enough of a benefit out of one of those we would have had to tie up to much money gaining little over time to get the linked benefit policy.

We were better off just investing normally and using just a small piece of the gains on those assets to protect those assets with a partnership plan with our state

 

[2017ish]

Self insure for us. Although we've extensively discussed (and documented) making end of life a relatively short process, we cannot be sure that those plans will be executable; thus, we have investigated the cost of highest-intensity LTC in our area. It projects to less than 1/2 a conservative SWR; our assets should be able to cover both of us simultaneously if we were to become simultaneously incapacitated.

 

[mathjak107]

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 ?

 

[Danmar]

Are self insured. Helps to be in Canada but still costs for some private homes are comparable to US. Our assets will be sufficient to cover any possible costs but LTC could still be a good reason to remain conservative in our withdrawals and spending.