Is long-term care insurance necessary?
Another study doesn't distinguish between the sexes,
but estimates that less than 40 percent of 65-year-olds will require
the services available in an assisted living facility or nursing
home, and most of them will stay less than two years.
No wonder boomers are slow to hop on the long-term-care
Even though insurance agents will urgently impart
that consumers should purchase LTC while they're still healthy,
it may be wise to hold off. Since the market isn't responding to
carrots or sticks, insurance companies are scurrying to design products
that are more palatable to consumers.
An interesting product offered by the aforementioned
Lincoln Financial Group, as well as other insurers, is a hybrid
life insurance policy with long-term care benefits. If the retiree
doesn't use the long-term care benefit, his or her beneficiaries
get the death benefit. If the retiree does use a portion of the
benefit, the heirs get anything that remains. Be sure to read all
the fine print and study the policies carefully before signing up,
Over the next few years, the insurance
industry will likely come up with other creative solutions.
The conventional wisdom is that you need long-term care
insurance if you have between $500,000 and $2.5 million in assets. If you have
more than that, you can self-insure, and if you have less than that, you may not
be able to afford the insurance premiums.
If you're 50 years old and currently have $500,000
in assets, they can grow to $1.5 million by the time you're 65,
assuming an 8 percent rate of return. They can balloon to more than
$2 million if you average a 10 percent return. In the meantime,
you can keep piling money into your 401(k) plan and
forget about buying long-term care insurance altogether.
Chances are much greater that folks older than 65
will need some help later in life but not necessarily a stay in
the nursing home. For those who need assistance, there's always
the option of hiring someone, preferably a family member. If the
family lives far away or is nonexistent, seniors can tap other resources
in the community that enable them to live with dignity in their
For instance, seniors who need help with paying bills
may consider hiring a daily
money manager. Or those who need help with basic daily activities
may contact a geriatric
care manager to assess their needs.
National Association of Area Agencies on Aging is a great starting
point for seniors or their caregivers to search for a wide range
of in-home services. From there you can tap into the eldercare locator
to find out about the services offered in your own community. For
instance, the 211
hot line in the area where I live and work offers a ton of assistance.
My goal is to live a fulfilling healthy life, decline
quickly at a ripe old age and die suddenly in my own home. Of course,
things may not play out this way. But purchasing long-term care
insurance is a not an easy decision since the coverage it offers
may not protect against financial mayhem at all.
putting the decision off for a few years, in part because I'd rather not add to
the profits of the insurance industry by parting with even more of my money. I'd
rather feather my own nest.
Longtime financial journalist
Barbara Mlotek Whelehan earned a certificate of specialization in financial planning.
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