This column is for you if you’re:
- Hearing more about long-term care;
- Telling yourself, “I should probably self-insure against that possibility.”
- Wondering, “What would that look like?”
After almost four decades in the financial services industry, I’ve observed some fascinating facts about human nature. One is this: the further away an event is, the more willing people are to ignore risk now by saying, “I’ll deal with that later.”
The problem? Later comes sooner than most folks expect.
Why else would a 45-year-old man keep telling himself, “I’ll do retirement planning once the kids are out of school.”
The same is true for that 60-year-old who says, “I think I’ll self-insure for long-term care,” (while knowing next-to-nothing about the imminent risk they are now so blithely ignoring).
Long-term care IS a risk issue for at least two reasons. One, because about 70% of adults over the age of 65 eventually require some kind of long-term care. And, two, because the annual median cost for that care (as of 2024) is between $26,000 and $127,750, depending on the level of care needed.
Like so many risk issues, the danger lies at the extremes.
One extreme seeks to avoid all costs (“I’ll self-insure…”). Ironically, this plan often morphs into the most, rather than the least costly option.
The other extreme tries to avoid all risks. This might be the person who buys the priciest long-term care insurance available…then hoards the rest of their money…then worries non-stop about expensive long-term care is!
Given the undesirability of both of those outcomes, I’ve got three less “extreme” suggestions:
1. Take a second look at long-term care insurance. (Make sure you talk with a knowledgeable, licensed agent.) These days it can be funded via a premium method (e.g., health insurance) or by deposit method (i.e., by buying a life insurance policy or an annuity, which also provides long-term care insurance).
Ask a financial planner to calculate your net worth 20 years from now with and without the long-term care insurance. You may find it makes little difference to your net worth if you stay well, but all the difference in the world if you require long-term care.
2. Take care of yourself. I am amazed how many people ignore this one. If you are not regularly exercising (under a doctor’s supervision) as a senior adult, you are asking for trouble. It’s never too late to take a step in the right direction…until you can no longer take that step. Taking care of your body may be the best investment you ever make.
3. Take care of your money. If you are determined to self-insure, that means you will function as your own insurance company. So, take care of your policy holder’s money. You can do this by controlling your expenses. Follow a spending plan (otherwise known as a budget). Make sure your money is being well managed. Most of us don’t have enough wealth to afford sloppy money management. Find someone you trust and who offers you a sensible plan for how to manage not only in good times, but in bad.
For some groups, long-term care insurance does not make sense. These people either have smaller incomes or lavish wealth.
For the rest of us, long-term care insurance probably deserves a closer look.
And while we’re speaking of long-term financial matters…
If you’re wondering about retirement, I’ve got a helpful, free tool. It’s called the RISA (i.e., Retirement Income Strategy Assessment).
In less than 10 minutes, it can show you what kind of retirement income plan best aligns with your personality, resources, goals, and lifestyle. There’s no obligation, and you can access it by emailing me (bmoore@argentadvisors.com).
Afterwards, if you want to discuss your RISA results further, reach out.
Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.
