44 Replies Latest reply on Jan 19, 2015 11:29 AM by lakulu

    LTC - again...

    Glicker
      I'm a bit of a neophyte about LTC details, though have read the State  plan option for our state, but wonder if only the spouse's  half of the total assets is vulnerable and the well spouse's  assets remain protected if one spouse contracts a condition that requires care beyond what the other spouse can handle. Does anyone have such expertise or even anecdotal experience in this area? I've talked  briefly with an attorney and she said she doesn't work on any sorts of  trusts regarding protecting assets for Medicaid-like issues because it's  an unclear area of the law and Congress can easily modify it. She  thinks the attorneys that offer lunch and a pitch are on the edge of  unethical (my words, not hers). That leaves two options: (a) purchase  LTC insurance, or (b) gamble that you can self pay without breaking your  asset bank. So we're on plan b for the time being, and as we get older  (now early 60s) LTC gets really expensive. Thoughts?
        • Re: LTC - again...
          MyR Community Manager
          Glicker,

          Thank you for creating a new discussion thread! We appreciate and enjoy your participation in the MyRetirement.org online community and look forward to your future contributions.
          • Re: LTC - again...
            jkom51
            The first thing to do is Google "Medicaid divison of assets XX" - XX being your state of domicile, and start reading. Medicaid is a 50/50 program: half paid by state, half by the Federal government. Kansas has one of the very best explanations for their residents on how the process works, for example...but it's the details that'll kill you, and those differ by state.
             
            When I said (in the other thread) that if you are part of a couple, your retirement savings should be considered 50% yours, 50% other spouse, that was NOT a legal definition, just a personal one. IOW, if a couple has saved $1M, and upon retirement takes 3% of that in an annual distribution, obviously it's a decent income for one person....but maybe not enough for two retirees to live comfortably.
             

            I would agree with your attorney re Medicaid/Medicare trusts (make sure you understand the difference between those two programs – they are NOT the same). None of these so-called Medicare trusts have been legally challenged yet by the IRS.

             

            The danger is that when a case finally (and inevitably) does go to court, if the IRS wins you don't really want to be that one landmark test case! She is quite right that Congress can, and often has, modified laws with back-dating provisos that can play havoc with any 'hiding-the-asset' plans.

             

            In any case, investigate senior care facilities in your area NOW. If you like your neighborhood, google them by zipcode! We are looking for my MIL (dementia) and found a surprising number of them close to us that we are looking at. Call up for an appt and tour – visit at least three. Every facility is different with a unique atmosphere and quality of life. They will all give you sales packages which detail the costs, services, and apartment layouts.

             

            Now you will know precisely what care might cost as of today – not tomorrow or four years from now, but at least for today. A good sales pkg will also tell you what the average rate increase has been over the last three years. It is important you know this, because every year, like car MSRP, facilities raise their prices. On average every twenty years the price will double.

             

            Don't ask just about independent living and assisted living. Find out what memory care and the 'serious care' (sometimes called convalescent care) costs are. They will be much, much higher. You should also Google for checklists so that you have an idea of the kinds of questions you should ask the facility sales rep.

             

            Remember that there are different reasons for going to a senior care facility. Some folks enjoy the community aspect and don't want the upkeep and worries of a family home any longer. Some people develop a disability or suffer an injury that cause them to go in and out of convalescent care. Others must go in because they can't be cared for at home by family any longer.

             

            For a couple, you should also ask how they handle situations where one spouse needs more critical care but the other is still independent. Different facilities handle this in different ways. Like buying a car or a home, the more places you see for comparison, the better informed you are about what your future options could be.
             
            This is why I recommended investigating facilities right now. You can't get a handle on if you have enough money, if you don't know what the actual costs might be.

             

            Now, regarding LTCi itself: I would be very surprised if you could both qualify for Premium (the lowest) rates, at your ages. Underwriting is currently very "tight" and I don't see that changing any time soon. You definitely want to stay under the state Partnership plan for LTCi. There are considerable tax advantages to it.

             

            There are a couple of alternatives to help with LTCi:

            -- Consider a limited-term benefit for the male spouse and an unlimited benefit period for the female. Why? Because women make up the majority of extended long term care claims. Plain and simple, they live longer than men, on average; therefore they run a much higher risk of incurring expensive eldercare costs as they become increasingly frail.

             

            The problem with this option is that some companies no longer offer unlimited benefit periods, period. And at your ages, that's doubly true. An insurer couldn't collect enough premiums even in a 10-yr period to pay for 15 or 20 yrs of increasingly costly nursing care, looking at a single person policy. That's why companies need to spread risk around, and why you need a financially strong company so that it stays in business.

             

            -- You must, absolutely MUST, have some sort of inflation protection and home healthcare benefits. Both are options and will double your premium cost, but without them the policy is worse than useless; it would be a waste of $$$ altogether.

             

            -- You don't necessarily need to cover total nursing home costs. That's what you have savings for! As one WSJournal columnist pointed out, even a $100/day benefit helps a lot. That's $3K/month coming in, no small sum for senior care.

             

            -- To get a break on LTCi premiums, get a 3-month (90 day) elimination period when you are self-insuring. If you can afford it and the company offers it, go to a 6-month elimination period – it saves a lot of money.

             

            Now, if you CAN'T qualify for LTCi, then there are the hybrid policies. But these are very new on the market with no track record. They are not quite as complex as buying an annuity, but they are not simple LTCi, either. They come in 2 flavors, both having LTCi as an available choice for the policyholder.
             
            The LTCi will be attached to either a life insurance or an annuity policy. On both, the underwriting is more liberal than with straight-LTCi so they are a better choice for seniors who wouldn't otherwise qualify.

             

            I have no familiarity with either policy, so lots of Net research and a good LTC broker – not your friendly neighborhood home insurance salesman – will be needed. If you go for the annuity/LTCi, be sure to hire an independent fiduciary financial planner to look over the policy provisions to make sure the policy is what YOU think it is.

             

            If the life insurance/LTCi is any type of variable-benefit face amount, the same planner should also look that over. Both are complex financial instruments and are often set up to be more for the insurer's benefit than the policyholder's. Unless you are accustomed to making sense of convoluted legalese, it's worthwhile hiring someone for a couple of hours to be on your side.
             
            Best of luck to you as you navigate the shoals of risk mitigation!
              • Re: LTC - again...
                Could continuing care retirement communities (CCRC) be a backup to not getting LTC insurance now when I'm 55? I decided before I turned 55, when LTC would be substantially lower in cost, to not get LTC insurance and instead wait until I'm in my sixties and look at continuing care retirement communities (CCRC). Is that a wise decision?
                  • Re: LTC - again...
                    That's what I've done.  I'm 70 and have never had LTC insurance.  I recently became an "off-site" resident of a CCRC, with full access to assisted living and skilled nursing if I need it.  The monthly cost is less than a LTC policy and I'm "approved" to move in when I'm ready. 
                      • Re: LTC - again...
                        I've not heard of an "off-site" resident of a CCRC. Can you tell me more? What state do you live in? I've been looking at a CCRC in PA.
                          • Re: LTC - again...
                            I live in Washington state and the community has a limited number of off-site residencies (five, I think).  We paid the entrance fee for a studio apartment, which few people want to live in and the community uses as a guest room.  We pay 1/4 of the usual monthly fee, which is less than LTC insurance and all of it is deductible as a medical expense, as is a portion of the entrance fee.  When we're ready to move in, all of the entrance fee will apply to whatever unit we decide we want. 
                             
                            Heidi
                              • Re: LTC - again...
                                Thank you! You have relieved me of getting my financial advisor off my back about getting LTC.
                                  • Re: LTC - again...
                                    jkom51

                                     

                                    Swishums said...

                                    Could continuing care retirement communities (CCRC) be a backup to not getting LTC insurance now when I\'m 55? I decided before I turned 55, when LTC would be substantially lower in cost, to not get LTC insurance and instead wait until I\'m in my sixties and look at continuing care retirement communities (CCRC). Is that a wise decision?


                                    Remember that my situation is different than yours. As part of a couple, we bought LTCi because we ran the numbers and determined that the disability of one spouse would quickly impoverish the other. In investigating CCRCs, because we have LTCi all of them offer a break on both the buy-in cost and the monthly unit rental.

                                     

                                    We have spent thousands of $$$ on homeowner, auto, earthquake, and liability insurance over the last 14 yrs. We have gotten almost nothing in return except risk mitigation. That is what insurance is – risk MITIGATION, not risk elimination. Only you and no one else, can determine how risky your factors are for needing LTCi.

                                     

                                    Our policies have cost us about $34K over 14 yrs. In return, each of us currently has $93K/annual benefit for facility care. That benefit goes up 5% compounded every year, with an unlimited benefit period. If we are non compos mentis in a wheelchair for the next 20 yrs, the insurer will still be paying that compounded benefit.

                                     

                                    So between us, my spouse and I have $186K+ of available tax-free funds, payable until the day we die. We could never have hoped to save enough money to generate that kind of return.

                                     

                                    So, should you use a CCRC as a sub for LTC? IT ALL DEPENDS. We have just finished investigating over half a dozen with Memory Care for my MIL, limiting ourselves to those within 15 min. drive of our home. There is little or no continuity between senior care facilities, whether CCRC or not. Even affiliated facilities (two of them have the same mgmt) had different rules. There are many different types of facilities: even within the categories, every facility runs differently from the next.

                                     

                                    CCRCs can be profit or non-profit. There can be a modest buy-in, or a very costly buy-in. Most have a Memory Care unit but not all of them (it's not mandatory). We found rents for Asst. Living units to be pretty much the same everywhere, but there was a HUGE difference in Critical Care and Memory Care charges. Be aware that most CCRCs only welcome healthy residents who can live independently or semi-independently; although they will accept sicker residents at times, they are limited by space availability – IOW, when you need it they might not be able to take you right away.

                                     

                                    With the difficult economy, some CCRCs have gone under or are in straitened financial circumstances. Are you confident in your ability to pick a CCRC with solid financials? If you aren't, whom could you trust to help you find an appropriate facility? What's the waiting list like? What's the staff turnover ratio? What kind of social community is it? – we found every single facility to be radically different in this one area.

                                     

                                    Does the CCRC have the same monthly cost for any type of care, or does it charge market rates for residents who need to transition to more daily assistance? Do you know what that market rate is? Can you afford it for an extended period of time? Will the CCRC apply for Medicaid reimbursement if necessary, or will they request that you find another facility that accepts Medicaid patients (of which there are fewer and much less desirable)?

                                     

                                    Do you understand that Assisted Living is just a stop-gap to full facility care? The average length of time spent in Asst. Living is only two years. Does the facility move residents to different floors/wings when more care is needed, or allow them to stay in the same unit as long as possible?

                                     

                                    You should know that CCRCs are legally able to call all their units Asst. Living, as that's what their licensing is for. But many have a strict categorization for residents: living independently, even if it is in a unit that is classified as AL, can be treated differently than true AL, where you are requiring assistance with certain ADLs on a daily basis.
                                     
                                    How much does the facility allow residents of different categories to interact? Many segregate AL and Memory Care residents almost full-time. In one excellent facility we investigated, although all their units are classified AL, if you actually need daily help, they move you to a separate wing entirely.

                                     

                                    • Re: LTC - again...
                                      foreignservice

                                      From AARP website:

                                      What CCRCs Cost
                                      The most expensive of all long-term-care options, CCRCs require a hefty entrance fee as well as monthly charges. Entrance fees can range from $100,000 to $1 million — an upfront sum to prepay for care as well as to provide the facility money to operate. Monthly charges can range from $3,000 to $5,000, but may increase as needs change. These fees are dependent on a variety of factors including the health of your loved one(s), the type of housing they choose, whether they rent or buy, the number of residents living in the facility and the type of service contract. Additional fees may be incurred for other options including housekeeping, meal service, transportation and social activities.

                                      • Re: LTC - again...
                                        smaneck
                                        Swishums said...
                                        Could continuing care retirement communities (CCRC) be a backup to not getting LTC insurance now when I\'m 55? I decided before I turned 55, when LTC would be substantially lower in cost, to not get LTC insurance and instead wait until I\'m in my sixties and look at continuing care retirement communities (CCRC). Is that a wise decision?

                                        Those are expensive and I don't anyone who purchased one who didn't regret it. Part of the advantage of LTC is that it provides for home care which may save you from having to go into a nursing home in the first place.  
                                          • Re: LTC - again...
                                            JerryD
                                            When you say "I don't anyone who purchased one who didn't regret it" can you add some detail as to why? Is it only a cost issue? Or????

                                            We have a very nice CCRC (I assume) that is run by a number of churches. A number of older ladies that we know have moved there and seem to enjoy the freedom, activities, food prep, etc. I don't know much about the medical issues there though. 
                                              • Re: LTC - again...
                                                jkom51
                                                 
                                                We have a very nice CCRC (I assume) that is run by a number of churches. A number of older ladies that we know have moved there and seem to enjoy the freedom, activities, food prep, etc. I don\'t know much about the medical issues there though. 
                                                Why have you not investigated the "medical issues?" Those are the most important of all to know about!
                                                 
                                                To be blunt, when we are investigating CCRCs I am not really concerned about who is going to be holding my hand during line dancing. I am a lot more concerned about who is going to be wiping my a** when/if I'm bedridden, and what that's going to cost me.
                                                 
                                                All of the facilities we've investigated (for MIL) are very nice. Only two would we consider living in ourselves. Having the LTCi gives us the option of choosing where we go...which is the great advantage of having it. That financial security is a tremendous relief as we age.
                                                  • Re: LTC - again...
                                                    smaneck
                                                    jkom51 said...
                                                      Having the LTCi gives us the option of choosing where we go...which is the great advantage of having it. That financial security is a tremendous relief as we age.

                                                    More importantly it gives you the option to use your benefits to get the help you need that would enable you to stay in your own home. For a lot of people, this will keep them *out* of a nursing home.  
                                                  • Re: LTC - again...
                                                    smaneck
                                                    JerryD said...
                                                    When you say \"I don\'t anyone who purchased one who didn\'t regret it\" can you add some detail as to why? Is it only a cost issue? Or????
                                                     They knew the initial cost, so that wasn't an issue. What they found after they got there however, is that they were being nickled and dimed for extra costs. 
                                              • Re: LTC - again...
                                                ActivistLady

                                                I'd love to hear more from Heidi! I also live in WA state, and would like to know where to look for the resources you speak of, to be part of a CCRC. My husband is a disabled vet and entitled to nursing home care, but I'm not, and have been considering LTC insurance. It's pretty steep, so I'd love to hear about this other option. Thanks for any websites or resources you can direct me to. Patti

                                            • Re: LTC - again...
                                              BoBraxton

                                              really cool

                                            • Re: LTC - again...
                                              KateS

                                              I follow the work of Dave Ramsey, radio talk show and author of financial advice for living debt free. He recommends applying for LTC at age of 60 because of the statistics (only a very small number of people use LTC prior to age 60, but numbers increase after age 60.)

                                               

                                              Waiting beyond age 60 may mean ineligibility if you end up being diagnosed with a condition a firm won't cover; additionally the costs for coverage may be higher.

                                               

                                              Full disclosure, I applied for coverage through a supplier recommended by our state at age 64 (am healthy and take no medications and had recently had a complete physical) and was able to get it without issue. I have talked with colleagues however who tried getting it into their seventies at which time health issues meant it was cost prohibitive.

                                               

                                              Hope this helps!

                                            • Re: LTC - again...
                                              BoBraxton

                                              thanks. wow!

                                            • Re: LTC - again...
                                              Carlos

                                              I found the information below on the website for the California Partnership Policy

                                              Special Medi-Cal laws are in place to pre- vent the impoverishment of a spouse if the other spouse needs to go into a nursing home. These laws allow the spouse remain- ing at home to keep a certain amount of their combined income and assets when the other spouse goes to a nursing home. In 2007, the spouse at home can keep all of the couple’s income up to $2,541 each month,
                                              and up to $101,640 in countable assets. (These amounts change every year.) The spouse at home can be granted more of their income, if necessary, through a “fair hearing,” or by court order. If the spouse in the nursing home has a “share of cost,” any income in excess of the amount the spouse at home can keep will go towards the other spouse’s share of cost. The spouse in the nursing home is allowed to keep $35 a month for personal needs and up to $2,000 in assets.
                                              NOTE: The income and asset limits for Medi-Cal change each year. For more information on Medi-Cal eligibility guidelines, specific income and asset limits, “spend-down” requirements, and any changes in state or federal requirements, contact your county social services departments. You can also contact your local Information and Assistance program at 1-800-510-2020 for information about free legal services in your area and help in understanding Medi-Cal requirements

                                                • Re: LTC - again...
                                                  jkom51

                                                  >>Special Medi-Cal laws are in place to pre- vent the impoverishment of a spouse if the other spouse needs to go into a nursing home......>>

                                                   

                                                  I thought we were discussing LTCi and CCRCs? I don't know a single CCRC who will take a Medicaid patient up-front. None of the eight near our home which we investigated would admit anyone in precarious financial circumstances.

                                                   

                                                  Re the AARP info: >>CCRCs require a hefty entrance fee as well as monthly charges. Entrance fees can range from $100,000 to $1 million — an upfront sum to prepay for care as well as to provide the facility money to operate. Monthly charges can range from $3,000 to $5,000, but may increase as needs change. >>

                                                   

                                                  Not actually correct as it's a very general statement. Quite a few CCRCs we researched had a minimal buy-in, from $3K to $10K upfront. BUT, for any kind of Assisted Living care (pill management, for example; or escort to/from shower/bath, etc.), or transfer to skilled nursing/memory care units, you paid the current market rates. And those are very high, indeed.

                                                   

                                                  I reiterate, until you know what independent living, assisted living, and skilled nursing/memory care costs at several facilities, you are shooting arrows wildly in the air hoping to hit something. You need facts, which means getting out of the house and actually visiting some of these places.

                                                   

                                                  My MIL paid $6K for a buy-in at a highly rated non-profit CCRC. She pays $3900 for a small studio with half-bath. Comes with 3 meals/daily, med techs on site, weekly housekeeping, all community activities. It's an additional $900 (expense level determined by the facility) for her pill management (daily) and shower escort (once a week). If she needs skilled nursing or memory care, they are separate floors but the same price - currently $7900/mo.

                                                   

                                                  In comparison, we looked at a CCRC we prefer. Buy-in for a couple ranges from $289K to $500K. Apartment prices are similar to MIL's facility but strictly for independent living when you first move in. A studio is $3800; a 2bd/2ba unit is $7K/mo. If you later move to a smaller unit there is no refund of buy-in. But if you need any kind of assistance later, your monthly charge doesn't change.

                                                   

                                                  As for being "nickel and dimed" to death, it's true that no CCRC covers everything, any more than an insurance policy (think auto or homeowners, for example) or Medicare does. You must budget for items that are "extra", no matter what.

                                                    • Re: LTC - again...
                                                      JoeW519

                                                      jkom51, once again you hit the nail on the head. Several nails in fact.

                                                       

                                                      If you have the money for both (LTCi and CCRC) you should have both. If you don't have the money, you don't have the money and you can name your poison.

                                                       

                                                      The CCRC is about where you live. LTC is about how you pay for care when you need it most.

                                                       

                                                      My mother: died when she was 101. She enjoyed 16 great years in a CCRC. When she was young enough, LTC wasn't readily available, so her LTC was paid by her (federal employee) health insurance and Medicare ... but most of us aren't lucky enough to have federal coverage, so we have to invent our own package.

                                                       

                                                      I have LTCi and will use it; either to pay for a nursing home or to pay for home health care ... that is one of the things worth paying for, imo. Until then, I'll try to live in my own home. If I can't, then I'll pray (and pray hard) that one of my kids can get me into one of three CCRCs in this area and I'll use their inheritance to pay for it.

                                                       

                                                      REally, the conversation here should be about one or the other: CCRC or LTC, not a comparison because they're not at all the same thing.

                                                       

                                                      Joe

                                                      • Re: LTC - again...
                                                        BoBraxton

                                                        These figures give me some idea of the monetary value of all that my younger sister does and has been doing for my own mother - in my sister's home - for years and especially during the recent few years of declining health (my mother's).

                                                      • Re: LTC - again...
                                                        BoBraxton

                                                        the state of Oregon seems to be onto something very important.

                                                        • Re: LTC - again...
                                                          jkom51

                                                          Carlos, I liked your post regarding what the CA state rules are for division of assets, I'm just not sure that the OP's state of residence is the same, so the Medicaid rules for the OP's state of domicile might be slightly different as to dollar amounts. There is just no substitute for doing personal research, focusing on your state of domicile. The Net is only good for generalities, as a rule.

                                                           

                                                          One of the senior forums I participate in did have several women who had done a division of assets upon the spouse needing full-time skilled care. They said doing so was very helpful. However, neither of them has needed facility care for themselves yet, so there is no telling whether they have sufficient assets to take care of themselves in their own old age. It certainly worries them, but like the OP they can't afford LTC insurance so all they can do is hope.

                                                           

                                                          There are many facilities who will take in residents, and then when the $$$ runs out, apply to Medicaid for reimbursement. 80% of seniors in long-term nursing care units are dependent upon Medicaid funds.

                                                           

                                                          The information that people need to research is:

                                                           

                                                          (a) What does convalescent and skilled care cost in your area? Labor is the big factor here, so you are way ahead of me (for example) if you live in a low-cost labor area.

                                                           

                                                          (b) What are the facilities like around you? To find this out, you must visit them. Take their brochures and literature so you can re-read and think about questions to ask. All facilities are different; you want a good "fit".

                                                           

                                                          (c) Can you pay for the facilities you like best? It helps to have a couple of choices; there may not be space available immediately at your first choice, when you do need to have help. If you can't assess the financial stability of a facility, you will need to find a pro to help you analyze the financial reports. When a facility goes under - not many, but some have - you may have as little as 30 days before being dumped on the street. Most are more compassionate than that, but you won't know until it happens. Make sure you have 'wiggle room' and a viable plan to go elsewhere.

                                                        • Re: LTC - again...
                                                          BoBraxton

                                                          We are ten years older, still in reasonably good health and also on the plan B (self-finance). I have read that when assets are at least a certain amount (I will not specify) then one can take the risk to pay for our own. So far we have that amount and more (the two of us combined).

                                                            • Re: LTC - again...
                                                              jkom51

                                                              When I worked for an independent CFP, his guidelines for his clients were if you have $5M in total assets that LTCi was unnecessary unless you wanted it. If you did, he did have an insurance license and staff was instructed to: (1) deal only with top name companies, and (2) unless otherwise specified, request $200/day daily benefit; home healthcare in addition to licensed facility care; compound inflation protection; three month elimination period.

                                                               

                                                              That was back in 2006; the total assets amount has probably been raised. While I was there, we had a client whose MIL lived in NY and needed to go into a nursing home. They were worth about $8M. Together they went out to NY to investigate facilities. It took over a month and the cost was well over $115,000/yr. for the facility they chose. Remember, facility fees don't include everything, either.

                                                               

                                                              They came back home, scheduled an appt, and asked for LTCi policies for both of them. They were both in agreement they were not willing to take the financial risk. They were both self-employed, so their businesses had value but between that and the land - they own a horse ranch in CA - they foresaw liquidity problems if one or both of them became disabled. When you have to sell in a rush, or at a bad market time, you won't always get top dollar. They were both in good health; probably a wise decision on their parts.

                                                                • Re: LTC - again...
                                                                  JoeW519

                                                                  jkom51, was there also a rule of thumb to guide advice for those at the lower end of resources? At what income or percentage of resources was it thought that LTC would be too much of a financial reach?

                                                                   

                                                                  I've heard 1% of resources mentioned as a limit for the annual premium.  Your thoughts?

                                                                    • Re: LTC - again...
                                                                      jkom51

                                                                      Like most CFPs, my ex-boss didn't handle anyone who had less than $500K of investible liquid assets - not net worth, but actual money to invest. Generally most folks who have that much have a net worth of $1M+.

                                                                       

                                                                      The lack of advice or products for the middle-class' financial well-being is a problem that can't really be addressed by the financial industry. It takes just as much time and effort to produce a financial plan for someone with $40K income and $100K portfolio, as it does for a client who makes $250K income and has a $3M portfolio. So clearly, based on fees, nobody can make enough money from middle-class workers for it to be worth it.

                                                                       

                                                                      You have 2 choices. Save a whole lot more money than you thought you would need, or have the foresight to buy LTCi before age 50, when it's more affordable. A lot of people don't bother to apply even for a minimal $100/day or $150/day benefit, and yet $150/day is $54,750/yr, income tax-free, not counting the compounded inflation rider benefit that will bump it up 3-5%/yr. Even if the policy only paid half of LTC expenses, that's still better than nothing.

                                                                       

                                                                      If you do get a policy, do not let it lapse! It's astonishing how many people are careless about this (I worked in life insurance for 13 yrs, and even wealthy people would forget to pay their premiums). Get it deducted automatically from your bank account!

                                                                       

                                                                      Get the longest benefit period you can afford. Different carriers have different policy terms. Very few offer the unlimited payout we still have. Our carrier desperately wants us to drop this and switch to a 7-yr limited payout. Next year we will be getting an 85% premium increase! But remember, I've always known our premiums were underpriced. We can manage this increase as it is still inexpensive risk mitigation compared to the actual cost of LTC. With my MIL in Asst. Living we are very aware of exactly how much it costs, every year. She is 86 and can easily live another 14 or more years. Whenever she does go into nursing care, her costs will jump from $58K/yr to $97K/yr.

                                                                       

                                                                      I've posted most of the following before but I'll reiterate: Underwriting for LTCi was very tight back when I pulled quotes in 2005-2006, and now it's worse. Conversely, life insurance premiums/underwriting have loosened/dropped considerably, because people are living longer despite bad health. Translation = insurance companies are fully aware the medical community can keep you alive for a very long time, no matter how sick/disabled, than ever before. This makes life insurance profitable but LTC much less so.

                                                                       

                                                                      If you are not in EXCELLENT health, you have no chance of getting Preferred rates for LTCi no matter what your age. That means minimal prescriptive medications, no serious illnesses mental or physical, good family history, proper weight for your height. If you are 58+ even Preferred rates may be higher than you expect.

                                                                       

                                                                      Underwriting is a bit looser for the new hybrid products: life/ltc or annuity/ltc. But both, especially the annuity/ltc, are complex financial products. NEVER buy them without having a neutral third-party professional go over the contract and discuss it with you. NEVER assume the insurance salesman knows the pros/cons of such products; most are trained only to sell.

                                                                       

                                                                      I'm not saying the sales reps are deliberately deceptive. But since everyone's individual financial situation is unique, you need to be very, very careful before buying a hybrid policy. These have only been on the market for five years or so and it's a free market out there. All insurance is priced to make the carrier a profit. Nothing wrong with that! But you want to make sure the policy fits your needs and will meet your expectations.

                                                                       

                                                                      If you do not have a relationship with an independent fiduciary advisor, you can hire one by the hour through Garrett Planning Network or NAPFA, a professional organization of independent CFPs (National Association of Personal Financial Advisors). You'll need to pay for several hours of advice, but it will be worth it, if the disability of one spouse risks beggaring the other.

                                                                      • Re: LTC - again...
                                                                        jkom51

                                                                        >>At what income or percentage of resources was it thought that LTC would be too much of a financial reach?>>

                                                                         

                                                                        I'm sorry, I didn't answer this directly in my very long post. My apologies!

                                                                         

                                                                        Back in 2006 my boss' criteria was that if the net worth was over $5M, LTCi was unnecessary as there were sufficient assets that could probably be liquidated to pay for care for one or both spouses.

                                                                         

                                                                        His limits on net worth may be higher now; I don't know. However, I believe I have posted before that even while I was there, one couple whose net worth was $8M had an agonizing experience putting an elderly parent into top-flight nursing care, and came into our office to request quotes for LTCi. But their situation was one of high net worth, but in assets that were not so easy to liquidate (small businesses, RE) if economic times were bad. They felt they needed the protection for liquidity purposes, and so we obtained LTC policies for them.

                                                                         

                                                                        As far as percentage of resources? Only you can decide that. 15 yrs ago everybody thought we were crazy - and said so to our faces - for purchasing LTCi. "Dumb" was what they were actually thinking! But now they're sorry they don't have it, although it's too late/too expensive for them to buy.

                                                                         

                                                                        Here's the thing nobody (consumers) likes to admit. If you buy LTCi early, before age 50, sure, it'll be a stretch financially. But even after price increases, you will never be able to buy it cheaper as you age. And if your income has risen and net worth increases, having the in-force LTCi is less of a drain, financially.

                                                                         

                                                                        My spouse and I do not have the best mortality OR morbidity. Just a fact of life to face. For us, we are prepared to pay for protection because we don't want the other spouse to be left eating dog food if one of us needs 24/7 care.

                                                                         

                                                                        After next year's increase of 85%, the total premiums for the two of us (separate policies) will be close to $8K/yr. Gasp! Stagger! Shock!............but that is one month's care for just one of us. What if both of us needed care at the same time? Then the annual premium for both LTCi policies is equivalent to a mere two weeks of care for us both.

                                                                         

                                                                        We just came back from visiting our CFP yesterday. We discussed the impact of next year's premium increase (the 85%) on our financial plnng. I told him we were determined to retain the unlimited benefit option as long as we could afford it. He agreed, saying that he currently has three clients in long-term 24/7 care facilities for over ten years. Two had LTCi policies - not covering the entire cost, but a good percentage - and are still able to manage financially. The third had no LTCi and has almost entirely drained his assets. His next stop will be moving to a Medicaid-only facility in 2015. Out here in our high labor-cost area, these are terrible places, not just to live but even to visit.

                                                                         

                                                                        Compared to the $100K/yr it takes for care, $8K/yr is affordable in our eyes. But we planned for a high cost all those years ago. You've got to put yourself "into the mindset" that you are willing to pay for risk mitigation. Too many people fixate on the premium, when they should be concentrating on what 24/7 care costs in their area on a yearly basis.


                                                                        If you're in a relationship, then that's 2x the annual cost for facility care. The question is, what are you willing to pay for, to reduce that financial impact?

                                                                          • Re: LTC - again...
                                                                            JoeW519

                                                                            Thanks for replying jkom51. The delay surely wasn't a concern.

                                                                             

                                                                            I like you (and your spouse's) plan as it seems to provide for common sense a good part of the way. Your replies have been helpful; I often think that an important issue for people shopping for the insurance is a lack of information on what actual costs are and several of your explanations should take care of that nicely ... assuming everyone who needs LTC actually reads the TIAA forum!

                                                                             

                                                                            I've adopted a version of that (based on experience with my mother's tenure in an independent apartment/assisted living/nursing care/hospice .... yes, we covered the whole gamut I think.

                                                                             

                                                                            Like you I purchased LTC when I was younger ... fifteen years ago now ... with the inflation rider on the policy which adds somewhat to each year's per diem coverage. In addition, my TIAA annuity will continue as will SSA ... so I'm "hopeful." AND in a lower rent area: 75 miles from Atlanta.

                                                                             

                                                                            My wife is not currently covered by LTC as she is considerably younger but we will buy her policy in a couple more years and will again include an inflation rider.

                                                                             

                                                                            Meanwhile, the notion of keeping what health I have ... and of continuing the fitness regimen for us both ... is center stage along with the annual visit from the insurance companies billing department. The best thing I can say about the bill is that it comes at a time when our other annual bills sort of calm down and we can breathe under the load again.

                                                                             

                                                                            Thanks again for your contribution .... I thought the suggestion I'd received to aim for premiums that would be "no more than 1%" of the annual income was highly unrealistic, and your comments help me to realize I'm not buying more insurance than is reasonable to expect may be needed.

                                                                             

                                                                            Joe

                                                                            • Re: LTC - again...
                                                                              BoBraxton

                                                                              for those in a relationship, these are questions each couple needs to answer - personally.

                                                                      • Re: LTC - again...
                                                                        Sharon

                                                                        This question seems to be on the mind of everyone over 50.

                                                                        I only have experience to go by.

                                                                        Paying cash for what you need, when you need it has been our motto.

                                                                        But that has to do with our genetic makeup and old relatives.

                                                                        No one in our family ever had insurance for home health or nursing home.

                                                                        And most of them are still alive, living at home in their late 90's.

                                                                        They pay for home health care a few hours a day.

                                                                         

                                                                        As for nursing homes, my dad was in one for a week before he died...not very expensive!  Lived on his own till age 95.

                                                                         

                                                                        As someone mentioned about Medical for California, if you own your own home, they let you keep it and your income up to $2500 a month ,and at the time my mom went into a nursing home on Medical, they allowed dad to have $75,000 in the bank. Mom's social security went to pay for her care.  We were told that after both died, the state would want their money back but nothing ever happened.  Dad lived 10 years after mom died.  Maybe the state just forgot.

                                                                         

                                                                        My father in law died at home, and mother in law several years later at her assisted living place that she loved. She paid about $4000 a month for her apt. and meals.  There was a nurse on duty when needed.  Doctor visits, they had a bus to take you and daily outings. 

                                                                         

                                                                        Someone else mentioned they knew of no one who liked what happened with the insurance...I only know of one person who bought nursing care insurance and hated it as it didn't even pay for half the costs.  If they'd invested the same as the premiums for the years they paid, it would have covered their expenses 10 times over and they would have had better care.

                                                                         

                                                                        But again it all depends on your health and attitudes on paying for things. 

                                                                          • Re: LTC - again...
                                                                            jkom51

                                                                            >>If they'd invested the same as the premiums for the years they paid, it would have covered their expenses 10 times over>>

                                                                             

                                                                            I hear this a lot. I can't answer for anyone else, but here's what we as a couple have paid TOTAL in 15 yrs, with gradual (class-wide) premium increases:

                                                                            $40,132

                                                                             

                                                                            For those who have lost track, our policies are: three month elimination period (cumulative), $270/daily benefit (I think I listed before incorrectly our policies paid $96K/yr each; that was based on 2012 records but this is the most recent, as of July 2014), 50% of current daily benefit/home healthcare (new policies now offer 100% daily, but ours is an older policy), and unlimited benefit period; e.g., forever. 5% compounded annual inflation increase on daily benefit, rising every policy anniversary date (July), no matter what the CPI does.

                                                                             

                                                                            Now - I pay a higher premium as a woman, about 1/3 more. So my spouse has spent about $18K and I have spent $24K. 15 yrs goes back to 1999. You might recall the market's stunning tech crash of 2000-2002, in addition to the Great Recession 2008-2010.

                                                                             

                                                                            I'd like to know what anyone could have invested in to turn 18K and 24K TOTAL into our two current policies of $98,000/yrly, income tax free EACH? Even at a 10% distribution rate assuming no earnings (you wouldn't want to take much risk with money put aside for eldercare), that's $1M apiece to put aside.*

                                                                             

                                                                            Obviously, there is also the issue of not having that $18K/$24K all at once to invest anyway. Early on, our total premium outlay was a piddling $1300/yr. Even now after premium increases it remains at 0.4% of our gross income for 2014. With the 85% premium increase coming in July 2015, the cost will be 0.9% of gross income.

                                                                             

                                                                            Meanwhile, our policy benefits rise 5% every July no matter whether facility/homecare costs rise 2%, 4%, or more. At this point with low inflation, our benefits have risen faster than facility costs every year for the last seven years. In previous years we broke even or close to inflation increases.


                                                                            As with all financial planning, I don't assume everything will go well with only a few 'hiccups'. I assume a lot may go wrong, very quickly, all at once, and if so....what are our options going to be? Our LTCi doesn't have to pay for everything; we want it to pay for most of the expenses; that takes a huge burden off having to liquidate assets in a "fire sale."

                                                                             

                                                                            Regarding family health history, some folks are fortunate. Others are not. We have LTCi because we don't have family who can take care of us, and we don't have sufficient assets so that if something REALLY BAD happens to one of us, it might well impoverish us both.

                                                                             

                                                                            Hopefully we will never use these policies. But the odds are not good. My spouse had a stroke at 50 and is beginning to show signs of early dementia. There is no way we could "save and invest" enough for a first-class facility in our area, even dividing assets. Where we live, $2500 monthly income is well below the poverty line. Remember, facilities don't cover all costs; residents/family are responsible for certain expenses as well as all extras to make a resident "comfortable".

                                                                             

                                                                            I reiterate, LTCi benefits are tax-free income, which is highly advantageous vs. distributions from a taxable investment portfolio. Think about what your paycheck stubs showed: the gross looked lovely, the net amount not so great!


                                                                            (* hope I did my math right -- I'm terrible with decimal points. LOL!)

                                                                            • Re: LTC - again...
                                                                              BoBraxton

                                                                              I am thankful for all perspectives / points of view. This (lengthy) discussion is very, very helpful for me.

                                                                            • Re: LTC - again...
                                                                              PAULMAC

                                                                              Signed up for LTC 15 years ago.  Best decision I ever made.  We were both healthy.  If either of us have to enter a retirement home for at least 5 months ($60k per year avg.) we would break even regarding the cost of premiums.  Longevity is prevalent in my family = grandparents lived to be in their 90s = parent is still alive at 94.  We certainly would not qualify now. Just my 2 cents.

                                                                              • Re: LTC - again...
                                                                                lakulu

                                                                                Which are reliable LTC insurance companies?