Key Risks to Retirement Planning – Long Term Care
If you are retired, or
considering retirement in the next few years, you may not have thought of ALL
the risks that could affect your retirement once you stop working. Here are a
few that could apply to you.
* Retire too early and you may run out of money
later.
* Improper structure of your
money - may leave you open to market
losses - or not enough income to pay your bills in the future.
* Low interest rates when you
retire, so you can’t get a decent safe rate of return to live comfortably in
retirement.
* Being too conservative in
retirement - that will not grow your nest egg to keep up with the cost of
living (inflation) during your retirement years. Especially important now with
6% inflation headlines in the news.
* Taxes - They can change depending on who needs your money; and how fast they
need it … think Uncle Sam, the I.R.S. and Congress.
These are all valid and
‘front-and-center’ real concrete concerns facing us all in retirement.
Have you thought about your
healthcare in retirement? That’s a real uncertainty, wouldn’t you agree? Don’t
you think understanding your health options is very important? The Affordable
Health Care Act and Medicare open enrollment period is now for many American’s.
Have you reviewed your health care options for 2022?
Long Term Care. Have you figured on long term care coverage and costs for those
services you may need someday.
Long Term Care risks are HUGE in comparison to the investment risks cited above.
They are not generally understood, and quite frankly – few wish to talk about
their physical challenges later in life. It probably won’t come up at tomorrow’s
Thanksgiving Dinner – but I hope this puts it in your mind to think more on it
and ask those you care about if they have considered it.
With a 7 in 10 chance
of folks age 65+ needing some type of long-term care during their lifetimes, this
is a much bigger threat to our financial health than the stock market’s
performance or where interest rates will be in the future. Agree?
How Much Does LTC Cost?
That depends on your location and your level of care. Also, the hours needed for
your care. A helpful tool I use for folks is provided by Nationwide Insurance
Company. Their app is at:
https://tinyurl.com/vjxsbw77 You
can select your state, metro-area, and hours needed and it will show you the
cost for the various levels of care now and into the future: informal care at home, assisted
living and nursing home, etc. Question: If one spouse spends $5,000-$7,000 a month for
LTC (which my father did this year before passing) how long before that would
start to affect your estate, your income, your legacy? Some conditions that would trigger LTC need are shown here. You should add cognitive impairment to the list: Alzheimer's, Dementia.
Some sources have likened
the long-term care challenge to a pandemic, with drastic ramifications on our
health care system as more people without the resources to pay for it may end
up on Government entitlement programs such as Medicaid.
The state of Washington has fired the first salvo in “forced” Long Term Care
coverage for its residents. This year, the legislature passed The Long Term
Care Trust Act, a law that mandates every worker obtain long term care insurance
coverage, or face a payroll tax if they don’t. It starts 1/1/2022.
Washington State will cover up
to $36,500 of costs for those who need assistance with bathing, dressing,
walking, or taking their medications, to name a few conditions. The math on
their plan: $100/day for 365 days. For
someone earning $100,000 a year, their payroll tax would be $580/year. A fairly
good deal for starters, but hardly all-inclusive for every health time-frame /
need. By design as most insurance works, it would burden young, healthy workers who are in effect
paying for older, perhaps sicker workers. Look for other states to try similar measures
/ laws to encourage people to get their own LTC coverages and avoid an on-going
tax or other levy.
Types of Plans
The most common type of plan pre-2000 was the Stand-Alone LTC plan, which was
affordable, and was a use-it-or-lose it design. Just like car or home insurance.
In the late 90’s hybrid plans were introduced, combining life insurance or annuities with
LTC, which boosted the benefits considerably in that the policies had a cash
value that could be used if you did not need LTC, or left to your heirs when
you died. These “qualified” LTC plans have generous government support.
Up to
$410/day can be used tax-free from these plans to pay for home care / community care services from
your policy. An investor would need deep pockets to private pay for LTC dollar for dollar. Investments could be needed sold, IRA’s tapped, taxes paid on the 401k money. It’s not a pretty
picture, folks to private pay down your estate and assets.
Where to Go Next?
Find out more of the basics of today’s Long-Term Care insurance. Contact me and
arrange an on-line meeting with me. I have resources that can be shared to
educate you also on the plans for you and your loved ones.
What Am I Doing?
My LTC insurance plan started in April, at age 63. It’s a cash indemnity plan (cash paid to me to spend as I wish) of $2,500
/ month for 3 years; 90 day waiting period. Death benefit $60,000 if no LTC used, and a cash value
component to use while I am alive or get back if I quit. This should cover partially my LTC needs. My daughter is enrolled in a nursing program,
so maybe she’s my future caregiver? In a perfect world: that’ll be my plan B or C or D perhaps.
Thanks for reading, and HAPPY THANKSGIVING !
Barry L.Unterbrink
Chartered Retirement Planning Counselor
Unterbrink@usa.net
(954) 560-3622
