Broker Check

Long Term Care Protection

Long Term Care Should be Considered

One of the biggest mistakes that investors are making with retirement savings is failing to consider long term care needs.  Long term care is the greatest unprotected risk that retiring Americans have today.

Long Term Care

The term “long term care” is used to refer to the whole spectrum of services offered for people who are unable to perform the normal activities of daily living, such as eating, dressing, walking around, using the toilet, bathing, continence, etc.

As a person’s health deteriorates, and they need assistance for these types of activities, they are often aided by family members.  But as their health slowly declines, often the best solution is some type of professional care.  In such situations, people usually progress through stages:  first home healthcare services, then adult day care centers, progressing to assisted living facilities and finally nursing homes.  And the common element in all these long term care services is that they are expensive.

How expensive is it?

Unless a retiree has purchased long term care insurance, a long stay in a nursing home or other care facility can be financially devastating.  The average cost of a nursing home in the United States today is about $70,810 per year.  In many Western states the cost is a little less – for example, Utah is one of the least expensive western states with an average cost of $61,685 per year.

The odds are against us with regard to long term care.  Of Americans turning 65, about 50% will enter a nursing home at some point in their life.  Most will be out of the nursing home – one way or the other – in less than two years.  But approximately 20% of them will stay for longer….many for up to 20 years or more.

Long Term Care insurance

One way to cover the cost of long term care is to purchase long term care insurance.  There are pros and cons to the insurance, but here are some things to consider:

  • The costs of the insurance (or the potential costs of the care itself) should be included in your retirement budget.
  • LTC insurance should be considered by retirees with an investable net worth of over $150,000.  On the other end of the scale, if your investments total over $2 million, you may want to consider a “self-insured” approach.
  • A good rule of thumb is to apply for LTC insurance at about age 50 – that’s getting close enough to when you might need it, but hopefully before you develop health problems that might make you ineligible.
  • The cost of the insurance goes up dramatically each year before you sign up, but is usually locked in at a level rate once you have purchased it.
  • Most policies offer an inflation option so that the benefit goes up each year in an attempt to keep up with increasing costs.
  • Most policies offer a home healthcare option so that the insured person can receive healthcare services in their own home.
  • Many insurance companies offer a discount for a married couple who sign up at the same time.

What FSI provides

You probably need more than just an insurance salesperson.  We provide information, live seminars, and an analysis that is customized to your situation.  Different solutions work for different people:

  • Long term care insurance
  • A self-insured approach
  • An added benefit on an investment or other account
  • Your children may be willing to care for you
  • The Medicaid approach
  • The head-in-the-sand approach (risky)

At FSI, we want to work with you to find the solution that fits you best.