The awareness level of the need for long-term care insurance has grown tremendously in the last couple of years. Life experiences teach valuable lessons, as many are witness to their loved ones needing long-term care and how that can erode years of hard-earned savings.
We also know that people are living longer. Life expectancy after age 65 is now 18.4 years, (83.4 years old), an increase of 5.6 years since 1940, according to the Older Americans Update 2006: Key Indicators of Well Being, Federal Interagency Forum of Aging.
The age at which many begin considering long-term care insurance is 50. We also have clients broaching the topic with us a couple of years before retirement.
This kind of portfolio protection is no longer the hard sell that it has been in the past.
The earlier one obtains long-term care insurance the better.
Clients should shop for the policy that would offer the most comprehensive coverage for care, which would include in-home care, assisted living and traditional nursing home care. We find that clients are oftentimes pleasantly surprised that premiums are more reasonable than expected for the coverage provided.
Determining how much insurance coverage one needs has a number of considerations. There is an advantage to working with a financial adviser who sees the entire financial picture so that we can factor in where the income sources will be in retirement.
Long-term care insurance can fill in any voids that might exist. We know that nursing home care costs about $6,000 a month. If you were to go out and purchase a long- term care insurance policy with a benefit to cover $6,000 a month for six to 10 years, it would be very costly.
But if we look at other income streams like a monthly Social Security benefit of $1,200 along with a pension of $500 and interest income from an IRA at $300, we know that we can self-insure through these personal assets or pensions and other income streams for $2,000.
Let's add the fact that we're doing a joint policy that offers a 30 percent discount. The next step is to make up the difference with a long-term care insurance policy.
This method ensures that we have looked at each clients' unique set of variables blending income sources with insurance coverage.
— Todd M. Kreuser is a certified financial planner for the Macco Financial Group in Green Bay. He can be reached at todd @MaccoFinancial.com.
