Someone recently asked, “If I’m already retirement age, is it too late—and too pricey—to consider long-term care insurance?
What I thought was, “It depends. How lucky do you feel?”
What I said was, “I recommend you plan like a pessimist so you can live like an optimist.”
Here’s why I answered that way: When we expect life to always go according to our plans, we invariably end up frustrated and wishing we’d planned differently.
However, when we’re a bit “pessimistic in our planning, we’re less surprised and better prepared for bumps in the road. By planning for potential negative scenarios, we increase our chances for a better outcome.
So, back to our question: Should older folks considered long-term care insurance?
That prompts another question, “If you had to go into a nursing home, how would you pay the bill?”
If your only financial resources are a monthly check from Social Security, the tab would likely be paid by Medicaid. (Medicare only pays after you’ve spent a certain amount of time in the hospital.)
But what if you’re in that group of folks who have worked and accumulated a nest egg? Unless you want to see those assets quickly depleted, you should think hard about long-term care insurance.
According to the current Cost of Care Survey by Genworth Financial, the cost of a semi-private nursing home room in north Louisiana is $64,605. For a private room, the cost is $75,190. (NOTE: By 2031, those figures are expected to rise to $86,824 and $101,049, respectively.)
At that rate, how long would it take to exhaust your savings? Perhaps not long.
“But,” you say, “Isn’t long-term care insurance prohibitively expensive?”
Recently I saw a long-term care policy for a 65-year-old quoted at around $6,000 a year.
That’s a lot of money. Is it even doable for most people?
Well, suppose you had a $500,000 nest egg. Simple math tells you that, at current prices, seven years in a nursing home would burn through every penny of that.
But think again about the long-term care insurance option. At $12,000 a year (a policy for two), that’s only 2.5% of your nest egg.
And since interest rates have risen above that, it’s possible you could pay your long-term care premiums out of your nest egg and never touch the principle.
That’s not the only interesting option for funding long-term care insurance.
If, for example, you’re willing to let an insurance company hold some of your money in a single premium whole life policy, you might not have to pay any premiums at all. (They use the float on your money to finance the long-term care insurance and even give you a little return on your money.)
And if you never had to spend that money on long-term care, your heirs could receive it tax-free as a life insurance death benefit. For those who have the means, this is an intriguing option.
Obviously, when it comes to paying for long-term care insurance, no single answer is best for everyone. So, you’ll definitely want to discuss all your options with a knowledgeable, licensed agent.
In the meantime, just remember…a little pessimism during your retirement planning can lead to a much more optimistic outcome in your retirement living.
And—last thing–if all this talk of nest eggs, long-term care insurance, and having enough income in retirement has you tossing and turning, email me at firstname.lastname@example.org.
I’ll send you a link to take the RISA® Profile. (RISA® stands for Retirement Income Style Awareness®.) This quick and ingenious quiz is FREE, and it can help you create a retirement income plan that makes fiscal sense for you.
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