Long Term Care Risks Loom Large in Retirement Planning

 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