Long Term Care Insurance

[LivingAlmostLarge]

Does anyone have LTC insurance? What do you pay for it? How much coverage do you have? What made you buy it? Where we lived passed a law charging people LTC tax if you don't have your own policy to opt out of. The tax is .58% or $580/100k of salary. The kicker is you must reside in WA state when you retire. You get a maximum of $36k paid out and it will be only after 10 years. IF you retire elsewhere then you get $0.

Hence the desire to potentially buy a portable independent LTC policy. Obviously I had no plans for this because we plan on self insuring, We would be paying around $1200/year January 1, 2022. But now what?

There are so many different options and benefits. It is not a straightforward decision.

Do we get 2 or 3 years? Do we get a policy with 3% COLA annual adjustment. So for a 3 year plan at $190/day = is $1766 Omaha or $1507 National General. Payout is a maximum $208k with 3% COLA ajustment. Or for $139/year we could do a $50/day $36.5k plan without a COLA. None of it seems wonderful to be honest.

What are your thoughts? I don't want to buy it but think of it more as a tax avoidance. I am unsure if we'll live where we are when we retire. Probably not. Even at a $1500/year premium the chances are we will pay that much with the tax. So anything around $500 seems smarter to avoid tax.

[QuarterMillionMan]

282102.pdf (genworth.com)

[Snicks]

I think the biggest concern is if you are married and one of you goes into the home and the other spouse could be financially devasted

[Like2Plan]

Does anyone have LTC insurance? What do you pay for it? How much coverage do you have? What made you buy it? Where we lived passed a law charging people LTC tax if you don't have your own policy to opt out of. The tax is .58% or $580/100k of salary. The kicker is you must reside in WA state when you retire. You get a maximum of $36k paid out and it will be only after 10 years. IF you retire elsewhere then you get $0.

Is that per person or does it cover both spouses? Do you get the same coverage whether your salary is 25k, 50k, 100k or 100k+ ? Is there a maximum per month that is paid out?

We have private policies. To be honest, it might be hard to evaluate a private policy because all 3 of our policies have had an increase in the premiums. Mine has been adjusted twice (I have had it for about 17 years). DH's has been adjusted once, although the company asked for 2 premium increases (one was rejected by the state insurance commissioner). The third one was mostly paid by his employer--the rates were due to increase and the employer didn't want to pay for it anymore. We were offered the option of paying 100% of the premiums (it was too expensive and the benefit was small) or a refund of all the premiums paid at some time in the future to go towards LTC- (it is not a lot of $$) I have to look up the benefit for each policy (there is an inflation factor). Our state gives us a small tax benefit for having LTC policies.

[LivingAlmostLarge]

The maximum is $36k paid per person. You are taxed 0.58% on uncapped salary. It is $580 per 100k and break even is $120k salary

[Like2Plan]

The maximum is $36k paid per person. You are taxed 0.58% on uncapped salary. It is $580 per 100k and break even is $120k salary

If you only have one employed spouse in the family, does the non employed spouse receive any coverage?

If you earn 50k per year and pay $290 per year for LTC ins for 10 years (and retire in WA state), do you receive 36k in benefits?

[LivingAlmostLarge]

Nope you have to pay in for like 10 years before you get it and you have to retire in WA state or else it's void. So if you leave you leave everything you pay in. And yes if you earn $50k you do get $36k back out. It isn't a good deal for anyone who doesn't plan on staying or anyone who is a high wage earner.

[Like2Plan]

And, does the non employed spouse also qualify for the LTC benefit based on the employed spouse's record?

[Like2Plan]

Oh! I just thought of another question: is it optional or mandatory?

[LivingAlmostLarge]

No the non-employed spouse does not qualify. You have to work and pay in for 10 years to qualify. You must retire in the state. And you must need care for it to qualify. If you don't need $36k of care then you don't get it. It's uncapped so if you make $200k you pay $1160/year for $36k and that's much more expensive than just buying it yourself.

The tax will be mandatory in 2022. We have until July 1st 2021 to buy a plan an opt out. Will be calling about it today.

[Like2Plan]

No the non-employed spouse does not qualify. You have to work and pay in for 10 years to qualify. You must retire in the state. And you must need care for it to qualify. If you don't need $36k of care then you don't get it. It's uncapped so if you make $200k you pay $1160/year for $36k and that's much more expensive than just buying it yourself.

The tax will be mandatory in 2022. We have until July 1st 2021 to buy a plan an opt out. Will be calling about it today.

It seems like you could get both spouses covered for less than the price of similar coverage for the state program (at your income level) and it would be portable.

But, there are no guarantees with the private policies (except that you could cancel the policy if you moved away and decided you didn't want the coverage anymore). I guess there are really no guarantees with the state, either, as they could raise the tax if they ran into shortfalls.

Another factor--even if you decided to opt in (and also retire in WA) is your DH (and you) would have another 10 years of work ahead of you to qualify and that might come into conflict with your FIRE goals.

The main reason we decided to get LTC insurance was because as Snicks mentioned above--we didn't want the surviving spouse to be impoverished after covering the cost of LTC for the 1st spouse.

[LivingAlmostLarge]

It seems like you could get both spouses covered for less than the price of similar coverage for the state program (at your income level) and it would be portable.

But, there are no guarantees with the private policies (except that you could cancel the policy if you moved away and decided you didn't want the coverage anymore). I guess there are really no guarantees with the state, either, as they could raise the tax if they ran into shortfalls.

Another factor--even if you decided to opt in (and also retire in WA) is your DH (and you) would have another 10 years of work ahead of you to qualify and that might come into conflict with your FIRE goals.

The main reason we decided to get LTC insurance was because as Snicks mentioned above--we didn't want the surviving spouse to be impoverished after covering the cost of LTC for the 1st spouse.

I think we're planning on maybe just buying the matching minimum. I have my serious doubts about staying in retirement. So I think it's a good hedge. I could buy more for $1500 or $1700 but I feel like it might be better to self-insure and invest the money than to go ahead and buy the higher coverage and premium.

[QuarterMillionMan]

In 2011, this was my policy.

[kork13]

I think we're planning on maybe just buying the matching minimum. I have my serious doubts about staying in retirement. So I think it's a good hedge. I could buy more for $1500 or $1700 but I feel like it might be better to self-insure and invest the money than to go ahead and buy the higher coverage and premium.

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.

[LivingAlmostLarge]

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.

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.