When is It Too Late to Buy Long-Term Care Insurance?

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 bmoore@argentadvisors.com

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.

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.

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