Posted on 09/28/2011 7:32:56 AM PDT by Kaslin
Dear Carrie: I'm 55 years old and trying to be smart about planning for my retirement years. What I'm struggling with is whether buying long-term care insurance makes sense. What do you think -- is it a smart move or just a waste of money? --A Reader
Dear Reader: You're certainly not alone in struggling with this question. With upwards of 79 million baby boomers currently living in the U.S. -- and people living longer -- there are lots of folks considering long-term-care insurance. And I believe they're wise to do so. That's because just as life-expectancy rates are going up, so are the costs of long-term care.
LTCI is now often an important part of a well-rounded financial plan. However, you bring up a good point. Not everyone will need it. Plus, premiums for LTCI aren't inexpensive. So you'll want to look at LTCI from both a financial and a personal perspective.
THE ODDS YOU'LL NEED LONG-TERM CARE
Of course, there's no way to predict for sure whether you'll need long-term care. A lot depends on your own health and family history. But current statistics provide some food for thought. For instance, the U.S. Department of Health and Human Services says that people who reach age 65 have a 40 percent chance of entering a nursing home. About 10 percent of these people will stay there five years or more. It's estimated that by 2020, 12 million older Americans will need long-term care.
WAYS TO COVER THE COST
The cost of long-term care -- what insurers call the "activities of daily living" such as bathing, dressing, eating, using the bathroom and moving --can be staggering. (The American Council of Life Insurers projects a 2.6-year stay in a nursing home will cost about $496,000 in 30 years!) And many don't realize that Medicare and other types of health insurance don't cover most of this type of care. For instance, Medicare will only pay for medically necessary (set ital) skilled (end ital) nursing and home care, such as giving shots and changing dressings, not assisted-living costs like bathing and eating. Social Security doesn't pay for any type of long-term care.
If you have family to care for you, that might minimize your need for LTCI (realizing, of course, that providing this type of on-going, hands-on care can be a huge task for anyone). Paying for care out-of-pocket may be an option if you have considerable assets. At the other extreme, people with a low net worth might qualify for long-term care provided under Medicaid.
However, if none of the above fits you, LTCI can be an extremely worthwhile choice.
EVALUATING LTCI POLICIES
LTCI can cover a wide range of services, from home health care and nursing services to adult day care. But not all policies are equal, so it pays to comparison shop. Start by checking the quality of the insurer: financial strength rating (A.M. Best is the leading rating organization) and length of time in business. Then review the terms of the policy to make sure you understand:
--What's covered: skilled nursing, custodial care, assisted living?
--Whether Alzheimer's disease is covered since this is a leading reason for needing long-term care
--Limitations on pre-existing conditions
--Maximum payouts and whether payments are adjusted for inflation
--Lag time until benefits kick in
--How long benefits will last
--Whether there is a waiver of premium benefit, which suspends premiums when you are collecting long-term care benefits
--Whether there is a non-forfeiture benefit, which offers limited coverage once a policy is cancelled
Another question to ask the insurance company is how many times rates have increased in the past 10 years. Also, if you're looking at a group policy through an employer, find out if it's portable, meaning that you would be able to take it with you if you change jobs.
FITTING LTCI INTO YOUR FINANCIAL PLAN
LTCI can protect your retirement assets should you need long-term care down the road, but you also need to consider the cost of premiums now. A 2011 report from an international insurance association states that the average individual now pays $2,286 for premiums in the first year of coverage, up 4 percent from last year. Generally speaking, age 50 to 65 is the most cost-effective time to buy LTCI if you're in good health. Premiums tend to go up the older and less healthy you are, and you may become uninsurable at some point if your health deteriorates. So while it's not inexpensive, buying LTCI sooner rather than later may be the smartest move.
Since you're in the prime age group, I suggest you talk to your financial advisor. Buying a policy now could be a good way to protect yourself -- and your assets -- in case of a long illness. Just make sure you exercise a healthy dose of due diligence before you buy.
“THE ODDS YOU’LL NEED LONG-TERM CARE”
Not True!
85% of folks die before needing LTC.
85% of folks entering LTC die within 6 months.
Have the discipline to set up an account, invest it yourself, and you’ll likely have enough to pay for LTC.
“85% of folks entering LTC die within 6 months.”
Where the Hell did you get that bullshit? The wife oversees the psychosocial departments for 30 facilities of all kinds and nowhere in any of those do 85%, much less anywhere near that, die within 6 months.
My hunch based on life observations, is that you are right or close to it. But as CodeToad said, from where are you getting your data?
I am not impressed with LTC plans. They are mostly just prepaid long term care payments. The contracts have lots of restrictions and limitations. I do not think that the LTC plans protect your assets. If you have high cost long term care needs, you will still exhaust your savings.
I have told my daughters that they will need to care for my wife and me if they want our money. Otherwise, the money will be paid for care. The hitch is that the economic collapse may consume my assets long before I need long term care.
We have family with dementia. One was in assisted living for a few months. Another is coming up on a one year anniversary. The third family member has been in assisted living for ten years. FWIW, especially if dementia is a concern, I’d recommend looking into the insurance.
Take a breath and read.
I didn’t mention “facilities of all kinds”
This is specifically about LTC.
I'd guess the data for Alzheimer's facilities is quite different.
People, on average, are living longer while afflicted with Alzheimer's. Remember how long Ronald Reagan lived with it... about a decade!!!
Think of it this way... Even if you bought a policy for $4,000/yr, the first month of benefit payments would probably reimburse more than the annual premium.
You can't do that with "self-insurance!"
That $4000 premium would be for a typical couple, both with a couple signs of becoming feeble, or forgetful.
That was general info, not a quote, by the way...
$300/mo from age 35 to 70????
Put it in the bank!
Our loved ones, God bless ‘em, didn’t get the duty-to-die memo :-)
LTC does not have an 85% death rate in any facility.
Ah....this is much different insurance than I suspected!
IMMORTATLITY!!!!!
Second, LTC insurance is costly, hundreds of dollars a month if starting at age 55 like the writer says.
Third, Medicare as presently constituted pays most of the costs of the first 100 days in a NH. BTW don't worry about that "skilled care" part. Every home and every doctor knows how to deal with that little detail.
Oh, and forget about "Assisted Living." None of them consider AL a "treatment milieu" so they won't pay for it at all.
Medicare supplemental insurance is far less costly than LTC insurance and will pay for varying numbers of additional days beyond MCR.
If you get Alzheimers and need to stay in the NH for several years you can expect to pay down your assets and then go on Medicaid, which will cover basically everything thereafter while Medicare B will continue to be in effect for various services.
What? "Put it in the bank?" What? And expect sub one percent interest to fund the need? It doesn't even keep up with inflation and never spreads the risk to thousands of others!!!
As to your statement about the treacherous limitations and exclusions... governmental regs keep those to a minimum through mandates and I suppose you've not noticed the raft of companies that have been forced by regulators to drastically increase their rates and are not realizing the lapse rates expected by actuaries because people covered hardly ever want to go back to your preferred status of owning the risk for life. But I'm wasting my key strokes where you're concerned!!!
My preferred alternative is to put that money into paying off the mortgage.
Then, if/when necessary, sell the house and buy into assisted living that has an LTC/nursing transition. (there’s a nice one down the street 2 miles.)
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