Do You Need Long Term Care Insurance

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Health care costs are a big concern for people going into retirement, but the costs of long term care can still be a shock.

Here are a few facts:

• 70% of people over 65 will need some form of long term care at some point.

• For married couples, the chance that one spouse will need long term care rises to 91%, says Byron Udell, CEO and founder of AccuQuote.com.

• People living alone are more likely to need some sort of home health care.

• Women outlive men, and thus, are more likely to live alone and need some sort of home health care.

So, while some financial planners previously were on the fence about long term care insurance, they were still encouraging people to at least have a plan for long term care.

“For Baby Boomers, long term care insurance is a must,” says Manhattan attorney Ann-Margaret Carrozza. “We can no longer rely upon Medicaid to cover custodial type care. We see over the course of the past few years that eligibility for Medicaid has gotten tougher. In 2006 the so-called look-back period was extended from three years to five years,” she says. During that period, the government can check, or look back, to see if you have sheltered or given away assets — and if you have, it triggers a penalty period when you’re ineligible for government aid.

“There are now proposals in Congress to increase it to 10 years,” Carrozza says. And, she warns, Medicare only covers up to 100 days of rehabilitation following hospitalization. “Beyond that — nothing!”

The Employee Benefit Research Institute says the average retirement shortfall for Baby Boomers and Gen Xers is nearly $50,000. But that rises dramatically when expenses for home health care or nursing homes are added: for married households by $25,317; single males, an average increase of $32,433; and by $46,425 for single females.

No wonder so many people are worried that they won’t have enough money to even cover health care costs in retirement, let alone make it through retirement in the lifestyle they are accustomed to.

Let’s start with the basics. Long term care is the service, both medical and non-medical, for people with a prolonged physical illness, chronic disease or disability. That care can be administered in-home, or in an institution like a nursing home or an assisted living facility.

“Custodial care will cost an average of $200 to $300 a day,” says Udell. “In-home care is somewhat less. In smaller (cities) it’s less. Most long term claims are actually for in-home care.”

He said the cost depends on a lot of variables, whether the care is 24 hours a day, whether a caregiver comes and goes. He said a relative has a live-in caregiver who is paid $1,200 a week, plus meals.

Meanwhile, Genworth Life Insurance Co., a leading provider of long term care insurance, says the average length of a long term care insurance claim is 2.9 years for a nursing facility and three to four years for all claims, including in home care, based on reimbursement claims data from December 1974 through December 2013.

“I think the overarching theme for us is that you have to deal with that issue (long-term care), whether you have the money to self-fund or whether you buy long-term insurance,” says David Richmond, president of Richmond Brothers, a financial and retirement planning firm in Jackson, Mich.

“It’s a really big number,” Richmond says. “Retirees are getting an idea because they are dealing with their parents. That care is not cheap and insurance will not pay for it. Once you have exhausted your 100 days, Medicare will not pay. You must plan what you will do and what it will do to your portfolio and your family.”

That said, the question is: Is long term care insurance the answer?

Financial advisers used to be mixed on the option. But they seem to be increasingly supportive of including the insurance as part of their financial plans…………………….

“Long-term care provides the elderly with the opportunity to stay in their home, which is where they want to be,” says George Hunter III of Hunter Capital in Columbia, Md. “Long-term-care insurance allows for that. It gives them flexibility and gives them choices. It lets them keep their lifestyle the way they want it.”……………………………

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“The biggest risk is if you are married,” says Richmond. “If one of you gets sick, it can be catastrophic to the family financially.” Say you need $4,000 a month to live on and you have a family member with early-onset dementia. It costs $5,000 a month for care. “………………..

 

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Do retirees need long-term care insurance?.