Recently, there have been several news reports and articles about the risk of living too long and how we should be planning for this longevity risk. One major plan for each of us should be how we will cope with, and pay for, long-term care issues without draining the retirement plan bank.
As a country, we are living longer. In a recent USA Today article (http://www.usatoday.com/story/news/nation/2014/10/08/us-life-expectancy-hits-record-high/16874039), it was reported that a 65 year old man today can expect to live another 18 years, while a woman of the same age can expect another 21 years. Keep in mind that this is just the average; half of all 65 year olds will live longer than that. The main reason is that advances in medicine have allowed serious illnesses to be kept under control, or cured altogether. Diabetes, for example, was once a major cause of death in adults. Today, with new medicines and diet, most diabetics live a long and fruitful life. Cancer too, while still the number one cause of death, some forms of cancer have been contained and, if caught early enough, eliminated by medical and technological advances.
That’s the good news. We’re all going to live longer! The bad news? These medical advances, while keeping us alive, have not done much to address our quality of life. Many of you reading this will have had experience with aging parents. Many of us are in what has been dubbed the “sandwich generation” since we are taking care of our own kids, while helping mom and dad with their needs. The problem is that we are being stretched too thin, physically, financially and emotionally. What do you do, attend your child’s football game, or help dad take a shower or use the bathroom? The stress in many of these situations can be overwhelming.
And the cost! Do we put dad in a nursing home at $6,000 per month so we can have a chance to breathe? And if so, how will it be paid for? Maybe dad has a pension or other retirement plan that can be tapped. Maybe he has investments that are just sitting there earning 1 or 2%. Think of your dad. Would he want to leave his home? Studies have shown that people respond much better to therapy and treatment if they can receive it at home. But if that’s impossible, where do you put him? If he has no assets to speak of, Medicaid housing might be an option. However, if this is the case, you must accept the first open bed, which could be hundreds of miles away, so again we are talking about quality of life, but this time, for us.
So how do we protect our children from falling into the same emotional black hole? The answer is obvious – long-term care insurance. We know this. We also know that it’s expensive, that premiums can be high. But high in relation to what? The average nursing home stay is about 2.5 years, so at today’s rates, that’s about $185,000. So would a $4,000 premium, in relation to what it would provide, be too high? Ah, but one of you raises your hand and says “But what if I don’t ever need it? My money will just be thrown away.” Yes, that’s a distinct possibility. The good news though is – you didn’t need it!! You lived your life as you wanted and died on your terms. If this is a real objection, take a look at an alternative – the “hybrid” policy. These policies combine life insurance with a long-term care rider or provision that allows use of the death benefit to pay care costs. If you don’t need it, your family gets a tax-free lump sum of cash. If you do need it, there is money available to pay for it. And, there’s a couple of other benefits in choosing this route. These policies are underwritten with an emphasis on mortality, not the risk of needing care, so premiums may be lower due to longer mortality tables. Additionally, if care is required, the money is paid to the insured, not to the caregiver, so it can be used as you see fit. One downside is that most of these do not have a way to adjust the benefit for inflation, so the monthly benefit may be less than hoped for if the need arises down the road.
You wish the best for your kids, and know that their careers will probably take them away from the old hometown. But even if they stay, do you really want them to uproot their daily routine to come over and bathe you? Stop for a moment and ask yourself which of your kids you’d like to bathe you, and then, imagine what their response would be. For some, it comes down to a dignity issue, but in any respect, this is not what anyone wants. So, dig out your agent’s card and give him or her a call and schedule a fact-finding appointment to find out your options, your estimated costs, and what affect doing nothing would have on you and your family. And don’t wait too long. Experience says that “waiting till later” usually ends up as “too late.”
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