Long Term Care Questions
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Anonymous
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I struggled with this a while ago and got one parent a LTC policy because she doesn’t have much in the way of retirement assets beyond social security.
For ourselves I lean towards nor fetting it but leave open to revisit when we are late 50s or so. There are disabilities/diseases that can cause you to need LTC earlier but many people wouldn’t need it until their 80s and 30 years is a long time to be paying premiums. Two things I learned— 1) even a policy that says it has a fixed premium for your lifetime can increase— the difference is tht the insurance company has to go to the atate insurance commission and makr a case for why they should be allowed to do it. Ten years ago this was quite frequent, today it is less frequent as the companies have learned to increase their premiums. But you should still expect that sometime in the next 20-30 years you will be given a choice between paying more for the insirqnce you have or accepting less insurance. 2) look for (or at least into) a “partnership” policy— this is a policy that meets certain minimum requirements set by the state for coverage. Then, if you exhaust your LTC coverage and need further nursing home care under medicaid, the state will allow to keep for yourself assets equal to the amount of LTC coverage you had. Normally to be eligible for medicaid you would need to “spend down” all your assets until you were poor enough to qualify for medicaid, but with a partnership policy if your LTC insurance covered $700,000 of nursing home expenses then you can keep $700k of assets and still qualify for medicaid. In my experience the LTC insurance company sold both partnership policies and non-partnership policies and getting the partnership label on the policy did not cost extra (but the minimum coverage requirements might be higher than you’d otherwise buy— for example a certain inflation rider). The state of CT pioneered these policies and had a lot of info on their website, at least when I was looking. Also the bogleheads forum has a ton of info/debate on LTC insurance. Very roughly I would say many posters there are sceptical that current policies being offered are worthwhile (although some people, particularly those who purchased when premiums were cheaper) are happy with their policies. |
Anonymous
| People who self insure don’t set aside money specifically for that purpose. It just means that you will pass that much less money on. |
Anonymous
| I have heard do not even consider a policy without the inflation protection (i.e. which automatically increases the benefit amount). |
Anonymous
Perhaps they just prefer not to think the issue through, which I can understand as it is rather depressing. Quite different from home insurance or car insurance because there is no "recovery" for the insured. But unless one has significant wealth --I'll define this as assets (not including RE) as $6,000,000 or more-- it seems like it would be wise to compare the maximum benefits pool versus how much you would need to set aside to self fund without it impacting your retirement lifestyle. |
Anonymous
| I don’t think some if you are getting the concept of self-insuring. It simply means that you believe you will have assets and sustainable income in retirement to meet this need if it arises. We aren’t “setting aside” any reserve for this purpose. For example, our retirement model is going to support a level of income around $150k/per year. If we are well, that will be spent on a pretty decent lifestyle. If we’re not well, it will be spent on health care and related expenses. If you need nursing care, “retirement lifestyle” is kind of out the window. |
Anonymous
By the time you need long term care you don’t have a “lifestyle”. |
Anonymous
Right, and that's part of the reason I believe people dislike thinking about it. But if you spend $150,000 for each of the first 25 years of retirement and then one of you needs $300,000 in LTC (or $X if you have a different number) per year for 5 years (while the healthy spouse still has at least $75,000 in normal expenses), your living expenses are now $375,000 a year and that might be more than some of our budgets can bear, even if we've got a decent nest egg of $3 - $4 million. |
Anonymous
| What kind of care costs $25,000/month??? I think your numbers are a little off there. |
Anonymous
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Here are some resources to help anticipate future LTC costs. Unfortunately, the DMV is one of the more expensive areas. (But I still hope my family won't ship me off to some place cheaper like SC.)
https://www.money-zine.com/calculators/insurance-calculators/future-long-term-care-cost-calculator/ https://www.marketwatch.com/story/heres-how-much-elder-care-costs-in-your-state-2017-06-26 https://www.morningstar.com/articles/823957/75-mustknow-statistics-about-longterm-care.html |
Anonymous
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Honestly it all depends on the premium of the various insurance options and that depends on your health and family history. If you have Alzheimer’s in your family,
Costs will be sky high and therefore self insurance may make most sense. Get the options all priced out and do a cost benefit analysis. Also, look into the rules for qualifying for Medicaid in your state. Another option for self insuring is an intentional spend down / asset transfer. Rules though are all state specific. A good eldercare attorney can explain this all to you if google searches are not sufficient. |
Anonymous
| And you need an insurance agent to price out the LTC options who will go to a number of insurance carriers. It just one or 2. You want to see the specific policy costs. |
Anonymous
| My father in law has one of the best LTC policies i have ever seen. His insurance company no longer offers it and its a money loser for them. He worked high up in insurance his whole career and is totally risk adverse. Starting paying on the policy 25 or 30 years ago. Not sure how much he spent on it. He now lives at Grand Oaks in "independent care" with some fast moving diabilities approaching, major fall at his own house. cost is 8200/month. His policy covers $6k/month for the rest of his life, not term limit. They fought us tooth and nail to start paying it cause they are gonna lose money. its paid for itself in one year. as his cost of care goes up, likely to $14k/month for memory care, the policy will still only cover $6k but its a lifesaver honesty he really could live another 10 years. When we were looking at places for him, every manager was like "wow"-no one has this kind of gold plated coverage. |
Anonymous
full time alzheimer care in an excellent facility in this area is 12-16kmonth, easily cost rising at least 5% each year. it could easily hit 25/k a month by the time we all need it in 15-20 years. |
Anonymous
| MIL had a traditional plan. She paid about $30,000 over the years, and got just about that much back in the last year of her life (through about 2 weeks of nursing care and a number of months of home health care.) She paid about 250 a month for two different policies. If she had stashed away what she paid over the years, she would have done better financially. However, she was bad at saving, she spent money when she had it. If she had tried to sock it away, she would have spent it and would have had nothing to pay for her end of life care (she was running out of money at the time). So for her, it was a good choice. |
Anonymous
| My MIL has had a LTC care policy. They basically closed the group and not let anyone new into the group. The premium increases are huge for not a whole lotta coverage. I don't think it's worth it. My parents are self-insuring and paying a lot to stay in an assisted living/indep living/ nursing home but we are fortunate they have the money. I'm not sure how long it will last. The places that accept Medicaid are not places you would want to stay in. |