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Making the case for long term care: Don’t risk it!

Planning for long term care in retirement

If you are in your 50’s, 60’s and beyond, this information is for you! With around 8.2 million Californians in or over their 60’s, (an 8% increase from 2013), the ability to afford health costs as they relate to aging becomes imperative.

Leaving our care up in the air and trusting that Medicare has NEVER been an option. Entitlements like Medicare and Social Security are under renovation. Translation: you may need more than what the common entitlement programs are able to offer.

Middle aged Americans need to include long term care into their retirement planning so that they can truly capitalize on their golden years. The need for caregiving is expanding, especially with life expectancy showing a steady growth in the past 5 years. The so called ‘sandwich generation’ is expected to care for their elderly while taking care of their family, and the market options that we can rely on get more confusing as health issues arise during our life’s continuum of care.

I find that most Americans fall into one of these categories:

  • Individuals with high or very high levels of income can perhaps plan to self-fund long term care costs, providing that the research on costs –including inflation—is included in their retirement plan.

  • People with Medi-Cal can get assistance in covering their care needs in their retirement so long as they qualify for assistance.

  • But the majority of individuals sit in the middle without really knowing how to solve the long term care puzzle. Some might have some financial assets that can cover long term care costs, such as a reverse mortgage or sale of their home, if needed. Many are left with the decision to either buy a traditional or hybrid policy. The decision is difficult, as most of us really don’t know how much care and what type of care will be needed as we age.

Have you noticed that we always make sure we are protected through a health, home and car insurance policy, for example? Surprisingly, many of us are still unsure of why and if a long term care policy is necessary, especially when there is so much information regarding other sources of care. The hardest part of deciding whether we need a long term care policy or not is figuring out:

  • How much care do we think we’ll need down the road – Three years? Two? One?

  • Will we be able to afford it?

  • What other sources of care should we considered when needed.

Long term care is perhaps the most difficult aspect of retirement planning. Even though the amount of time might not be predictable, one thing is for sure: not all long term care extends until the end of your life. I found a couple of resources published by AARP that helps put things into perspective when thinking about long term care:

Figuring out long term care has now become more of a balancing act. Demographics show there is a need for long term care, and offerings in the market are responding to those needs. Enter the traditional long term care policy, vs. the hybrid one. While a traditional policy offers the ability to choose the daily benefit amount, the benefit period and whether you want to include inflation protection to budget for Long Term Care, the hybrid policy incorporates the benefits of long term care into a life insurance policy or an annuity. If you need long term care, the costs associated with such care are deducted from your life insurance policy, but do not affect your retirement budget. Although more expensive, the hybrid policy prevents the payment of premiums for coverage you may not use.

Furthermore, a recent survey conducted by LIMRA (Life Insurance Market Research Association) indicates that “pre-retirees are clearly more concerned about some risks as opposed to others; public policy (and how it affects retirement), and healthcare-related risks tend to worry pre-retirees the most.”

So, does anyone really need a long term care policy? The answer is how much you are willing to risk if something does happen? “If you’re anything like me, you just want to know what’s coming at you, and how to prepare for it –including how to fully understand how this works” comments one my clients, Alicia Wells.

This is where I come in. I can assist in finding the policy that best fits your needs depending on your age, health condition and especially your budget. The recommendation I typically give my clients includes:

  • Let me do the research for you: I can help you analyze the costs from a broker perspective, and those aspects you need to look for that respond to YOUR needs.

  • Propose alternatives for you: The cost of insurance has increased, and will continue to do so. There are other alternatives in the market, and perhaps your retirement savings can offset some of the costs of your care down the road, for example. We have also briefly touched on the recent Hybrid Long Term Care policy and offsetting care costs through an annuity of life insurance policy.

  • Budget analysis: I have had the opportunity of working with my clients in establishing their budgets. The one conclusion that stands out comes down to affordability within an expectation: avoid overpaying for care that might be difficult to afford own the road.

Ready to start looking?



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