The Experts: Should People Buy Long Term Care Insurance?

2 Apr

Long Term Care InsuranceRecently the Wall Street Journal posed the question SHOULD PEOPLE BUY LONG TERM INSURANCE to The Experts, an exclusive group of industry and thought leaders who engage in in-depth online discussions of topics from the print Report.

Predictably, answers are along the lines of  “Probably but we would rather not think about ” to “Definitely but timing is key”

One of the answers really stood out in the way it presents the reality that all of us have to face in thinking about the possibility of needing long term care. Written by Ken Dychtwald, a psychologist, gerontologist, best-selling author of 16 books, this answer points out that the potential high costs extend beyond the financial aspect.

I rarely include long quotes in my blog posts but in this case I wholeheartedly agree with his point of view. Below is an excerpt: 

“Ken Dychtwald: Why I Bought Long-Term-Care Insurance

With the average life expectancy now at 78 and rising, taking a moment to think about your—and your family’s—possible future long-term-care needs is becoming an essential piece of retirement planning. With our longer lives, two-thirds of people over age 65 will need some kind of long-term care, and many of us aren’t prepared for it. In fact, most of us haven’t even thought about it.

Uninsured medical expenses are now the top financial worry among men and women age 55 and over. People worry most about these expenses’ unpredictability and potential for high costs. To make matters worse, many Americans are confused about what long-term care actually is, and they’re surprised to learn that Medicare and/or traditional health insurance do not cover most long-term-care needs.

My Own Personal Decision to Buy LTC Insurance

When I turned 55, eight years ago, my wife, Maddy, and I stopped to talk about what might happen to each other and to our family if one of us ever needed long-term care. We knew that purchasing the insurance would carry a cost—it’s definitely not free! And I do not like the idea of rates being hiked up from time to time. However, we concluded that there were far higher potential financial and, even more important, emotional costs to avoid for ourselves and our children. We realized that if either of us ever needed some help, we wouldn’t want to burden our children and take them away from their own families or careers to look after us. And, if either of us ever needed care, we’d prefer to receive it in the comfort of our own home. My parents bought their long-term-care policies in their 70s; we decided to buy ours in our mid-50s when the rates were lower and we were far likelier to qualify. We also took advantage of special discounts for couples and very attractive tax advantages for small-business owners. We think of our long-term-care policy as “peace of mind insurance.”

The Coming Caregiving Crunch

Many people assume that if they should ever need long-term care, they’ll be able to get a family member to pitch in. Currently, an estimated 66 million Americans serve as unpaid family caregivers. But beyond the often costly out-of-pocket finances, these responsibilities cause nearly half of caregivers to miss work, change shifts or even miss career advancement opportunities. However, due to several unprecedented demographic and social changes, there will be fewer family caregivers available in the years ahead. Declining birthrates resulting in smaller families, the superior longevity of women, repeated housing relocations (with family members living at a distance) and the rising number of middle-aged women in the workforce has begun to create a mass shortage of family caregivers: a “caregiver crunch.”

Talking and Planning for Your Peace of Mind

Whether you wish to self-insure by setting aside sufficient funds (a home-care aide could cost $30,000 to $40,000 per year—my parents have had an aide helping them out for over 10 years; without their LTC policy picking up the bill, they would have had to spend over $400,000 by now, and nursing care could cost twice that) or purchase an LTC insurance policy, don’t wait for an emergency to ignite your decision-making. You should not wait until you’re either too ill or too old to plan for this possibility.

There are three core topics in family conversations about long-term care: (1) What care options are most preferred (e.g. If you needed some help, would you prefer to be cared for at home, in an assisted-living facility or in a nursing home?); (2) Potential roles and responsibilities of different family members (and possibly, help from a professional care coordinator, aide or nurse), should it ever be necessary to manage care; and (3) How to pay for any required long-term care (with your or family members’ savings, through Medicaid or with a long-term-care insurance policy). Alarmingly, my firm’s research has found that over 90% of all Americans have NOT discussed all three of these issues with their spouses, adult children and/or parents.

To read the full article on the Wall Street Journal website, click here

If you need advice on what your options for Long Term Care Insurance are, please feel free to contact us at The Baron Group and we will be happy to provide a complimentary, no obligation consultation. 

 

 

 

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