Long-Term Care

Everyone has concerns when it comes to money—it’s one of those rare subjects, like health, that affect each person regardless of age, background, or level of wealth. 

One of the most crucial aspects of financial planning is uncovering each client’s biggest financial concerns and determining whether risks can be mitigated or avoided altogether. In candid conversations about what causes the most anxiety, two concerns consistently rise above the rest:

I don’t want to outlive my money.

I don’t want to be a burden on my family or anyone else.

These worries can feel more and more realistic in a world where people are living longer. Advances in healthcare can also mean a more active lifestyle for many years—and more years to spend money.

longevity and good health

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Longevity and good health are both great things, but they require diligent planning to maximize one’s lifestyle without realizing one’s worst fears. This dilemma often raises the question of long-term care: how to approach it and how to plan for it.

While no one wants to imagine being in a situation where they or their spouse might need this type of care, it is a common source of apprehension. We’ve all heard stories of success and failure from friends or family.

According to A Place for Mom, a company that specializes in finding the right assisted living facilities:

70% of adults who live past age 65 will need some type of long-term care.

The average stay is over three years. Those statistics can be alarming and may lead some retirees to save more than necessary to meet this uncertain future cost. Without proper planning, this often leads to under-spending and a less fulfilling lifestyle after retirement.

There are options for long-term care insurance, but the benefits and premiums can be confusing – especially so if your conversations are only with non-fiduciary insurance agents focused on selling policies.

BEFORE DECIDING WHETHER TO BUY A POLICY, THERE ARE MANY THINGS TO CONSIDER.

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A fiduciary advisor who knows your entire financial landscape can assist by asking the right questions to help make this highly personal decision manageable in your overall financial plan.

• When should you consider a long-term care policy?
  • Typically, age 55-65 is ideal for cost and benefit, but it can be smart to weigh options either before or after that, especially if it is causing concerns.

• What will a policy cover? And will you qualify?
  • Coverage limits, usually expressed in a dollar amount per day, can be customized based on the expected costs, the area where the care will be needed, and the portion of expenses the policy is meant to cover. Like life insurance, the policies are underwritten to look for existing health issues to decide eligibility and pricing. Married couples or healthy individuals typically earn a premium discount or boosted benefit.

• Are you buying a policy to prevent running out of money or to protect certain assets and provide a legacy?
  • Both are common answers and will likely affect the type of policy needed. There are hybrid policies that also act as life insurance. If the benefits are not used in a person’s life, premiums are paid back to a beneficiary. These can be a significant tool for preserving wealth and maximizing inheritance.

• Is an existing policy still appropriate?
  • Companies began offering coverage only a few decades ago, but there has already been a lot of change in long-term care insurance. With the swift rise in the cost of care, many older policies quickly became underpriced, leading to years of sizable premium increases. The question of adjusting to the new premiums, or not, ties in with the rest of the financial plan and several variables.

• Is it true that if you retitle all your assets, the government will pay for long-term care?
  • This can cause major, unexpected issues and should typically be avoided. Assets moved into trusts, or into the names of family members are subject to a five-year look-back period. If care is needed within five years, it is still viewed as owned by the original owner. This situation also creates the issue of losing control over the assets, often a lifetime’s worth of accumulation, and what happens to those assets. Even if performed correctly, the government’s Medicaid program leaves little choice of facility or level of care.

• Should you self-insure?
  • This is a common question, but it should be reserved for those who have a grasp on what expenses could be and are able to pay for care if needed.

“The most important part is simply having the conversation, even though it can be an easy one to avoid.”

HAVING THE CONVERSATION

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Discussing these questions with a trusted fiduciary will usually lead to an appropriate answer. Education on the topic can also provide the added benefit of relieving some current anxieties. The most important part is simply having the conversation, even though it can be an easy one to avoid. If planned correctly, this decision can save an enormous sum of money and, perhaps more importantly, years of worrying.

The concerns that everyone experiences with money are highly personal and the solutions to many of them can seem intimidating or confusing. However, having a solid plan around long-term care or other significant concerns can relieve some of the stress about the unknown of the future and allow us to live life to the fullest now.