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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. 




The Intangible Costs of Long Term Care

28 Aug

Since the dawn of time the circle of care for most families usually follows a very predictable pattern: parents take care of children when they are little and then when parents are old, the children take care of them. Little has changed in that arrangement throughout the centuries and most of us are prepared for that and expect it. It is only natural. Part of life. Expression of responsibility and devotion to our parents.

We all are fully aware that there are also significant costs associated with long term care. Genworth Financial, one of the largest financial institutions specializing in long term care, has been publishing for nearly a decade now their annual Cost of Care Survey covering nearly 15,300 long term care providers in 437 regions nationwide. This report is particularly useful for Americans who need to plan for the potential cost of this type of care.

The entire cost however is not only financial and spans much further than the impact it has on the family’s finances. To assess the true impact of long term care on its providers and recipients, Genworth conducted a survey of more than 800 consumers with personal involvement in a long term care event lasting more than 30 days. The results of the study are published in a report called Beyond Dollars: The True Impact of Long Term Caring.

The study divides the parties involved in four self-explanatory categories:

– care recipients

– primary caregivers and secondary caregivers – usually spouses, siblings, children or in-      laws

– broader community – religious organizations, community non-profits, friends and neighbors.

The Care Recipient Perspective:

When someone experiences a debilitating health event – short term or long-term – that may require them to be dependent on others, to dip into savings or stop working, the effects can be significant. There are obvious consequences and new circumstances, other impacts are unseen, but real nonetheless.

For example, 42% of the care recipients said that they felt stress with their spouse and 35% reported stress with their children. When it comes to financial impact, 88% said their household income was reduced by an average 34% due to their long tern care event and a whopping 63% reduced their savings by almost 70%. As far as out-of pocket costs are concerned, the study found that on average care recipients spend $14,000 out-of-pocket for their own care and that does not even include the cost of facility care. It is difficult to think about the possibility of needing long term care and 49% of care recipients report that they had not considered the possibility of ever needing it. Yet, 29% required care for 3 or more years and 37% has to move into a family member’s home for an extended period of time.

The report cites participants in the study:

“My wife had to be available 24/7. She also became my chauffeur and needed to help me shower and dress – to help me move at all, really. It impacted her freedom and her lifestyle.”

“I think my son and daughter worried that I would want to move in with them so they could take care of me. Fact is, I didn’t. It was the elephant in the room for the longest time. I have always valued my independence. That doesn’t change with age. But I inevitably ended up needing their help. I am grateful and don’t know what I would have done without them, but it definitely altered their way of living and mine.”

The Primary Caregiver Perspective:

Being the main caregiver has serious impacts on both the emotional and financial well-being of an individual and their family. Juggling time, career, family and finances are the most prevalent stress points, but they are only part of the personal and emotional issues that make providing Long Term Care (LTC) expensive on so many levels for the primary caregiver and their family.

One of the most significant issues with long term care is that it is in most cases an arrangement for considerable amount of time. 43% of the primary caregivers surveyed reported that the care recipient resided in their home for more than 3 years. And 57% of primary caregivers provide care for longer than 16 hours per week. So it is not surpsising that such extended care has a direct impact on the primary caregiver’s life – from their relationships, finances and health to their career and social interactions. Over a third of surveyed caregivers reported direct negative consequences to their own careers resulting from the responsibilities to a care recipient. Many of these family members worked fewer hours with repeated absences. And nearly 20% reported a direct loss of career opportunities. Additionally, 44% had to work fewer hours and 48% lost a job, changed shifts or missed career opportunities.

The relationship and emotional impacts are also present for the primary caregivers. 44% report an increase in stress with their spouse and 23% experienced an increase in stress with their children.

In the words of the study participants themselves:

“In theory, I believed I could take care of my Mom, keep up with her home, and take care of my family, my kids and myself. In reality, I’m running Mom to her doctor appointments and my kids to school and sporting events and sleepovers. I am constantly torn, feeling guilty that I’m not doing enough for anyone, including taking care of myself these days.”

“Caring for my dad has left me with much less time to spend with my own daughter… With three generations living together, there is a whole new set of rules to live by and a new set of frustrations for everyone.”

“I am an only child, and my mother’s plan was to have me care for her. She became ill during the worst financial crisis of our lifetime…She is better now, after 11 months. But I am broke.”

The Caregiver’s Family Perspective:

Spouses, children, in laws and siblings of primary and secondary caregivers are also very much impacted in a long term care situation. Very often the family dynamics changes significantly. Supporting a care recipient requires time, commitment and care beyond physical needs. A spouse may resent the intrusion and withdrawal of attention they are used to receiving.

Additionally, children feel neglected when parents have to tend to their grandparents. Also, financially, college and retirement savings contributions suffer as a result of the changing focus and the increased need to cover long term care expenses.

In the words of the study participants themselves:

“I can’t attend to my children like I used to do anymore because of the care I have to give to my mother… The kids seem to act up more in school or their grades are not as good as they once were.”

“Less time for activities. Homework is stressful if there are things going on with Mom, Dad or Grandmother, and we have to hurry sometimes.”

Plan Ahead

So how can we minimize the impact of long term care? The answer seems very simple yet very few of the surveyed participants in the study have done so: PLAN AHEAD.

More than half of the respondents (55%) reported that their greatest fear regarding a long term care illness or event was being a burden on their family. In fact, they reported being five times more concerned about being a burden than dying.

Although the issue is a top concern, many are still not engaging in open conversations about potential long term care expenses, the costs or the types of care they would prefer or may need in the future. More than 90% surveyed have not talked about critical long term care issues with their spouse/partner, aging parents or adult children.

First step in planning is talk to your family.

Once you have decided what would be the best course of action if a potential need for long term care arises, meet with your trusted financial advisor and explore your options for long term care solutions.

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