The most common goals for people when planning for retirement are:
- Paying off college debt for children
- Paying off the mortgage
- Having enough assets to create a sustainable income
- Having time to travel
- Having time to spend with loved ones
- Locking in a supplemental medical insurance plan to work with Medicare
- Having wills & trusts in place
- Having life insurance to cushion the costs associated with death
However, many do not realize the tremendous financial and emotional burden that can be caused by a long term care situation – not only to the person who needs care but also to the caregiver.
If long term care is needed, the 6 progressive stages are:
1. Chore services (i.e. house cleaning and yard work)
2. Meal preparation
3. Adult daycare
4. Assisted living
5. Nursing home
The average monthly costs range from $1517 for adult daycare to $8121 for a private room in a nursing home.
Not everyone will need long term care. The American Association of Long-Term Care Insurance estimates that the chance of a person who is 60 years old needing long term care for more than 90 days during their lifetime is approximately 35%. However, that is a very high probability when looking at insurance risks (i.e. the probability of your house burning down is approximately .08% in the United States according to insurance statistics from 2009.)
Historically, the two biggest problems with traditional long term care insurance policies have been:
1. The insurance company can appeal to the state insurance commission for permission to raise premiums.
2. If you were one of the 65% who did not need long term care, then you paid all the premiums and never got anything for it.
Some companies offer hybrid long-term care insurance policies. These policies will allow a person to deposit a sum of money into the policy (all at once or over up to 20 years) which will generate a guaranteed amount of long term care insurance for one person or for two if they are a couple. If you do not need to use it for long term care needs, it will pay out a death benefit of at least the premiums paid. These contracts have solved the problem of potential premium increases or dying and receiving nothing. One of the features we like most is that if the insured decides they do not want the insurance any longer, many policies allow them to simply pull most or all of their premiums back out of the policy at any time.
Financial Professionals Incorporated has been helping people get good long term care insurance policies from top rated companies since the 1980s. We are not affiliated with any insurance companies, but we do help our clients access them if needed. We do not believe everyone should have long term care insurance, but we do believe everyone should take a hard look at how a long term care event would impact their financial planning in regard to sustainable income needs. Should you want a more in-depth analysis, we are happy to help you take a look at how long term care expenses might affect you and your family.
Sources: Financial Strategies for Successful Retirement, The American Association of Long-Term Care Insurance, The Long-Term Care Insurance Sourcebook