Long Term Care Insurance

[kork13]

The correct measurement would be how much would you have investing the $1500/year for say 30 years? It's only $126k if you assume $125/month for 30 years compounded at 6%. So it's less than needing the benefit. BUT we aren't paying $1500 and we may not live in state (very likely) and what if we don't need LTC at all? There are people who just go into a hospital and die. That is the gamble you take.

Talking with my mom they didn't and they gambled with savings. It's looking more and more for my dad the wise thing. He probably will end up not needing LTC. That means the premiums would have been wasted.

That's exactly my point -- you don't really seem interested in a LTC policy, and I expect that you'll easily have the funds to self-insure. If you have plenty of money, it's not really gambling. But given the new law, if your options are either (A) pay into the state's $1200/mo LTC plan that's not a good deal for you; or (B) purchase a token LTC policy at $500/yr that meets the requirement & exempts you from paying into the state's plan... Going with option B is a $700/yr win for you. The $500 LTC policy is an unavoidable sunk cost of living in the state. Buy the token policy, then once you leave the state, you can cancel it & move on with your life.

ETA: To answer your point about the long term "best outcome".... It will almost ALWAYS be in your favor to invest in your own. How can I say so with such certainty? Insurance companies are driven by their number crunchers. Unless you use the policy early on, the insurance company calculates your rate based on precise calculations to ensure that THEY MAKE A PROFIT. Instead, why don't you make the profit for yourself, and just invest the money yourself? Like the casinos, insurance policies will always ensure that the house wins. The company would be unprofitable & unsustainable otherwise.

[QuarterMillionMan]

LAL, I beg to differ with your math. For simplicity sake let's say $1500 a year times 30 years equals $45,000, does not equate to $126,000 as in your computation. Granted I'm not factoring any gains or 6% or any inflation. Again for simplicity $1500 a year x 30 years is $45,000 total.

In comparison with LTC coverage at $1500 a year for 30 years (age 77 in my chart) the lifetime benefit is $427,000. Big difference from self insured covering $45,000 (again not factoring inflation or any gains or 6%, etc).

[Like2Plan]

There are people who just go into a hospital and die. That is the gamble you take.

Talking with my mom they didn't and they gambled with savings. It's looking more and more for my dad the wise thing. He probably will end up not needing LTC. That means the premiums would have been wasted.

I think what WA state is offering is pretty expensive (especially if you end up retiring elsewhere), but I found an article on the subject:

"52%: Percentage of people turning age 65 who will need some type of long-term care services in their lifetimes."

Must-Know Statistics About Long-Term Care: 2019 Edition
Christine Benz
Nov 25, 2019

https://www.morningstar.com/articles/957487/must-know-statistics-about-long-term-care-2019-edition

I'm sorta of the opinion that if you start building wealth young enough (and/or heavily enough), it's totally feasible to self-insure for LTC. In general terms, insurance is there for life events that you are not otherwise prepared to cover yourself..

How much would you save in order to be comfortable with self-insuring for LTC?

[kork13]

How much would you save in order to be comfortable with self-insuring for LTC?

I'm sorta of the opinion that if you start building wealth young enough (and/or heavily enough), it's totally feasible to self-insure for LTC. In general terms, insurance is there for life events that you are not otherwise prepared to cover yourself. If you must purchase a LTC policy as a tax avoidance measure, then so be it -- get the cheapest minimum coverage required. Otherwise, invest & build up the funds to cover the care. I don't remember the source, but I read at one point that most LTC policies are only used for <3 years of care, covering an average of $300k in care, almost always as end of life care. If you have $600k+ in accessible money, I'd say you're pretty well covered.

I'll admit I haven't done any detailed planning for it at this point in my life... But considering LTC is basically an end-of-life expense, it really shouldn't need to be outrageous. Sure, the remaining spouse would still need sufficient money to live off of, depending on what other streams of income are available (SS, pension, etc.). But strictly for LTC self-insurance, I'd call $600k dedicated to that end game a pretty safe bet.

[Like2Plan]

I'll admit I haven't done any detailed planning for it at this point in my life... But considering LTC is basically an end-of-life expense, it really shouldn't need to be outrageous. Sure, the remaining spouse would still need sufficient money to live off of, depending on what other streams of income are available (SS, pension, etc.). But strictly for LTC self-insurance, I'd call $600k dedicated to that end game a pretty safe bet.

Would that be in addition to what you plan to cover your expenses? Say, you decide you need 1 million (at retirement) for your retire expenses plus 600k? (Or, would the 600k be included in the 1million?) Would that be sufficient to cover both spouses?

DH and I both have LTC ins. I am assuming our potential need for LTC will not occur until more years down the road and inflation will take a toll on our coverage amount. (Also, it would only be partial coverage right now). We will have to fund any shortfalls out of savings. It is one element of retirement planning that still leaves me a little uneasy.

[disneysteve]

LTC is basically an end-of-life expense, it really shouldn't need to be outrageous.

Long term care can involve years of services. You could definitely burn through 600K, especially if you go into an extended care facility. And you may have outpatient services for months or years before you end up in the nursing home. It's not just end-of-life stuff unless by that you mean the last 5 or 10 or more years of life.

[kork13]

Would that be in addition to what you plan to cover your expenses? Say, you decide you need 1 million (at retirement) for your retire expenses plus 600k? (Or, would the 600k be included in the 1million?) Would that be sufficient to cover both spouses?

DH and I both have LTC ins. I am assuming our potential need for LTC will not occur until more years down the road and inflation will take a toll on our coverage amount. (Also, it would only be partial coverage right now). We will have to fund any shortfalls out of savings. It is one element of retirement planning that still leaves me a little uneasy.

Not necessarily retirement + LTC, but if your want to be totally secure, then sure. It approaches a point that if you have enough, simple investment returns will cover any LTC required. Especially for the second spouse, everything you have is on the table. It's going to be personal, guided by your own perspective & risk tolerance & knowledge of your family's health history. But if pressed for a number, I'd go with the amount you need for living expenses plus LTC for the 1st spouse (so in your example, $1.3M).

I'm not saying LTC policies are bad.... I just prefer the idea of self-insuring through it, and I think that's totally feasible if planned out properly. IMO, that planning (and achieving those planning goals) would totally eliminate any concerns about LTC.

Long term care can involve years of services. You could definitely burn through 600K, especially if you go into an extended care facility. And you may have outpatient services for months or years before you end up in the nursing home. It's not just end-of-life stuff unless by that you mean the last 5 or 10 or more years of life.

Certainly, 5-10 years in LTC is possible. But it's improbable. As I said (wish I had the source, but can't dig for it right now), research strongly shows LTC typically only goes for <3 years, typically costing up to roughly $300k. And when it does go longer like that for 5-10+ years, it's typically in a more permissive environment (ex: in-home assistance) where a lower level of care (and associated cost) is required. Sadly, institutional LTC (and the medical/health conditions that require it) simply is not statistically correlated with a long life expectancy.

[QuarterMillionMan]

LAL, you were correct.

[Like2Plan]

This is from the article I linked above.
2.5 years: Average number of years women will need long-term care.
1.5 years: Average number of years men will need long-term care.

But, these are averages. My Mom's Mom was very healthy and fit her whole life. By the time she reached 96, she needed more help. She was still fiercely independent. My aunt found her a situation where she still had her own apartment, but had meals served in a dining room. As time went on, she needed more help and moved to the nursing home section for the last 2 years of her life (she lived to be 100).
Grandma was a role model for me in terms of looking after her health (as well as financial management). She had money set aside to take care of these costs (which I have no idea--how much that was or how much to expect in the future.)

[Like2Plan]

I'm not saying LTC policies are bad.... I just prefer the idea of self-insuring through it, and I think that's totally feasible if planned out properly. IMO, that planning (and achieving those planning goals) would totally eliminate any concerns about LTC.

I don't think LTC policies are great, either (even though both DH and I have them). Mine has been adjusted twice over the course of 16 years. IIRC, I think I started out with 5% inflation factor and that was adjusted down to .9% inflation factor on the last adjustment (I had a choice of a reduced inflation factor or a huge premium increase). So, how much is that going to be worth if and when I need it?
My two concerns with LTC insurance are--inflation will greatly erode the benefit or they adjust the premium to the point where I can no longer afford it (after paying for it for many, many years). Maybe three concerns--that the LTC actually pays up when if the time comes (I have also heard of folks having trouble with that, too).

Self insure has its risks, too. We've already covered impoverishing the surviving spouse. But, what if you get to the point where you can't manage your assets anymore and your future heir(s) (not speaking necessarily of your children) are more concerned with preserving your estate than to spend the money you have set aside for your LTC on LTC? (I sometimes see these types of questions being posed on other financial boards.) At least with the LTC insurance, it has to be spent on LTC.

There was a recent movie on Netflix called "I Care A Lot". Which you might think this story line is really out there, but...

https://www.vera.org/blog/the-question-of-guardianship-how-the-elderly-lose-their-rights

Conventional wisdom from financial planners used to recommend buying LTC insurance in 50's-60s's. So, not something most people thought about until later on. I don't know if this is something is going to shift. But, I suppose LAL could purchase the minimum required policy now and re-evaluate in the future.

[LivingAlmostLarge]

Long term care can involve years of services. You could definitely burn through 600K, especially if you go into an extended care facility. And you may have outpatient services for months or years before you end up in the nursing home. It's not just end-of-life stuff unless by that you mean the last 5 or 10 or more years of life.

So this is why my mom said pass and buy minimum. Because a lot of care won't qualify for LTC insurance depending on the policy. It might be you want to stay in home and have caregivers everyday for an hour or two. Or it might be that you want and assisted living facility that isn't covered. There is less flexibility.

I agree that it makes sense at least for us to get the minimum policy and then reevaluate more. I really don't think we'll be retiring here so then it doesn't make sense to pay in a lot of money. It does make sense to get something portable and potentially disposable.

[QuarterMillionMan]

In 2019 Genworth cut in half my long term care benefits. I chose to go with plan C the least expensive as you can see. Can someone explain what the limited paid up coverage would have entailed if I had chosen it ($10,115 paid up policy benefit). I believe that is the total amount that I had paid up to that date. If I had chosen that option is that the amount Genworth would have reimbursed to me and basically cancel my coverage?

[Like2Plan]

In 2019 Genworth cut in half my long term care benefits. I chose to go with plan C the least expensive as you can see. Can someone explain what the limited paid up coverage would have entailed if I had chosen it ($10,115 paid up policy benefit). I believe that is the total amount that I had paid up to that date. If I had chosen that option is that the amount Genworth would have reimbursed to me and basically cancel my coverage?

]

They only pay out if you have a LTC claim in accordance with your original criteria.
So, assume you’ve met the criteria, they would pay out the original per day amount until they reached the 10,115 amount and then they would be done.

[QuarterMillionMan]

I see, thanks.

[LivingAlmostLarge]

How can they do these things?