Regardless if you believe in Long Term Care (LTC) insurance or not (or your advisor doesn’t) you still need to include the costs related to LTC in your retirement plan, even if you’re able to self-pay. Why? Because the statistics on longevity show that people are living longer and will likely need LTC at some point in their lives. How many years you will need LTC and what it will cost are the unknowns in most financial plans.
High net worth individuals can self-fund their LTC and low-income individuals that receive Medicaid have LTC covered. It’s the middle-income people that have to worry about how LTC will affect them. Seeing the impact of self-funding the cost of LTC at 100% versus the LTC insurance premium outlays will be important for you in order to make an informed decision for yourself.
Financial plans that are missing LTC costs are incomplete and you may want to ask that it be added to your plan. With the cost of LTC increasing year over year, not considering how it will affect your retirement savings can be devastating to you later. Financial advisors have the software to formulate a financial plan with the assumed costs of LTC and how your retirement nest egg may be impacted. After that, it’s up to you to decide if you should consider purchasing LTC insurance or not. Only you can make that determination when presented with your financial plan’s information.
Some surprising LTC statistics provided by Morningstar in August 2018for you to consider:
52%- Percentage of people turning 65 this year who will need some type of LTC in their lifetime
47%- Estimated percentage of men 65 and older who will need LTC during their lifetimes
58%- Estimated percentage of women 65 and older who will need LTC during their lifetimes
123%- Percentage increase in the number of people who died from Alzheimer’s dementia 2000-2015
$341,840- Estimated lifetime cost of care for someone with dementia
$123,600- The maximum amount of assets that a healthy spouse can retain for the other spouse to be eligible for long-term care benefits provided by Medicaid in 2018. (Actual amounts vary by state.)
Today there are hybrid types of LTC insurance that cover more than just nursing home care; a common complaint from retirees that paid into older policies and never went into a nursing home. Once you have the information from your financial plan, it’s time to research LTC insurance hybrid policies and the companies that provide the insurance for specialized type of care. The decision to private pay your care or purchase LTC insurance is yours to make and will determine how your retirement assets last, if you need care later.