Long-Term Care: What’s Your Plan?

LTC- Ostrich head in the sandLong-Term Care (“LTC”) is a big deal. 70% of those over 65 will need LTC before the end of their lives. One in eight Americans over 65 has Alzheimer’s. 40% of those currently needing LTC are between the ages of 16-64. The 2012 national average annual cost of LTC was $81,000. Costs are escalating 4-5% per year. People are living longer and the cost of care continues to rise.

As a review, LTC means the help needed when someone suffers from dementia or needs assistance with at least two “activities of daily living,” such as bathing or dressing. The care can be provided at home, an assisted living facility, a skilled nursing facility, or a continuing care retirement community.

It’s no surprise that we at DWM consider planning and financing for LTC a key element of financial planning. When we are reviewing MoneyGuidePro simulations of the future with our clients, we usually stress test the plan for LTC. Can the plan sustain the burden of 2-5 years of LTC costs per individual? There are public programs such as Medicaid that pay for LTC, however, our typical client would not qualify for Medicaid. Hence, it is typically a question of “Do we self-insure or do we get a LTC policy?”

Traditional LTC policies are priced based on age, health, years of coverage, the inflation factor selected, and other details. Joint plans are available that provide a couple with a pool of money, that can be used by either of them. Premiums are increasing due to three main factors: claims have been higher than expected, policyholders are not allowing policies to “lapse,” and insurance companies aren’t earning as much these days on the investments of the premiums they collect.

In addition, women are starting to be charged higher premiums than men. It’s not surprising: 2/3 of every LTC benefit dollar is paid to women. They generally live longer than men and have no caregivers at home. Genworth Financial, the country’s largest LTC insurer, plans to start charging women as much as 40% more than men. In addition, in an attempt to minimize future claims, underwriting at insurance companies is getting much tougher.

If you decide to insure, it’s important to work with knowledgeable LTC professionals and make sure your insurer is strong financially so they will likely still be in business if you need to submit claims. You also want your LTC insurance agency as committed to being your advocate when you file benefits claims as they are to have you sign on as a new policyholder.

Lastly, many seniors these days would prefer to stay safely, comfortably, and independently in their chosen residence as long as possible. LTC policies generally provide coverage for both assisted living facilities and benefits for care at home and services for aging in place.

Planning for LTC is very important for everyone, but more so if you are 50 or over. The decision to self-insure or get a LTC policy is often difficult. DWM, of course, doesn’t sell insurance, but we work with excellent LTC professionals in both Chicago and Charleston/Mt. Pleasant who can provide information and answers so that you can make informed decisions for your and your family’s future. If your LTC plan is not in place yet, give us a call. We can help.