If you are at least age 55 and in good health, here’s an idea to jumpstart your Long-Term Care insurance protection while premiums are affordable. People ask me when should we buy LTC insurance. I usually say, “when the kids leave home and the dog dies”. The sweet spot is about age 55. I recently paid my homeowners insurance and the annual premium was about $1400. No one ever thinks of not owning homeowners insurance even though the risk of needing it other than (for a ten or 15 year hail storm) is very slight when compared to needing care as you age. But, we think nothing of paying that premium year after year even after the home mortgage is paid.
What if we think of our Long-Term Care insurance as paying rent to have access to money we hope we never need. Let’s use an average annual home owners premium of $1400. Then tell yourself, it I can pay that much premium to protect my home then what If I matched that same premium and used it to protect my retirement principal in the event of a long-term care episode.?
Here’s how your plan would look. You could start with an openinghealth care checking account balance of $103,200 that would provide a monthly benefit of $4300 today for home care ,assisted living ,or heaven forbid nursing care. This account balance and the monthly benefit would grow by 5% compound inflation so both would double about every 15 years. The annual rent (or premium) would be about $1400 per person. And if you’re married, why not get a joint health care checking account to include your spouse just like you do with a joint checking account at the bank so you both have access to the joint pool. The odds of one of you needing to access it increases from 60-80% as you age beyond 65.
The goal would be to accumulate a buildup of available cash just like you are doing with your home equity so that by the time you both reach ages 80 in 25 years your joint checking account would total about $700,000. And, you’d have your home equity $500,000 + available for care as well. That’s over $1 million between these two planning strategies available to pay for care if needed. During this time you paid annual rent of $1400 x = $2800 x 25 years= $70,000 for the LTC protection. If you divide the $70,000 or premium (rent) by the value of the pool of $700,000, you’d get 10%. In essence, you paid about $.10 to have access to a 130% dollar because the benefits are tax free.
Why wait until you need care and use a 130% dollar to pay for yourcare, because to net a $1, you always figure in the tax first. Long term care insurance is just paying pennies to have access to non taxable dollars if you ever need the money. And, just like you’re not paying that annual homeowners insurance in hopes of your house burning down, you’re doing the same with LTC, hoping you’ll never need it, and it’s a win win deal just like homeowners insurance. But doing nothing to protect your family from this risk could have catastrophic consequences in your life down the road.
If you are aging in to Medicare and do not have LTC insurance, Ican show you a way to buy the high deductible Supplement plan and use the savings to apply to a LTC insurance plan because the danger of a long-term care episode as you age is a much greater than the risk of a co-pay with a Medicare Supplement plan. Let me know if this idea makes sense.
If you are reading this and are over age 70+, and don’t believe youcan afford the premiums any more based on your income available to live on, then pass this idea along to a younger family member or friend, so they can get it now while it’s still affordable. But, please make other arrangements for care if needed, like your home equity, and annuity, etc. The cost in Manhattan Kansas for full care in a nice facility with a small private room is about $78,000 per year.
Only about 10% of eligible Americans ages 40+ have purchasedLong-term care insurance. 90% of Americans are flying by the seat of their pants when it comes to this issue. As the baby boomers age, the risk of needing LTC increases dramatically. You could say it’s the iceberg below the water waiting for the Titanic. For heaven’s sake, if you have the resources, get yourself a life jacket before it’s too late. If you are in the 10% group and already have LTC insurance, congratulations, you have made a wise decision.
Coach
