Money & Finance

Should You Purchase Long-Term Care Insurance?

That is a question that is not so easy to answer. Everyone has different circumstances and situations to consider when it comes to long-term care.

Retirement Plans Need to Factor in Future Healthcare Costs

by Carolyn Shott, Aug. 2012

That is a question that is not so easy to answer.  Everyone has different circumstances and situations to consider when it comes to long-term care.  Many of us believe that we will never need long-term care or that it is for the elderly.  This simply is not true.  Forty percent of those who are receiving care are pre-retirement age adults.  Certainly seniors have a higher likelihood of needing some kind of care, especially those 85 and older.  Those over age 85 are the fastest growing segment of our population and more than half of that age group is receiving some form of long-term care.

A recent Gallup poll showed that 76 percent of Americans believed that they would never need long-term care, i.e. no nursing homes, no assisted living facilities, no adult day care or home care.  The facts tell us that more than 40 percent of us will spend some time in a nursing home, while 72 percent of us will require home health care services.  The cost of a nursing home can range from $70,000 to $80,000 annually, which can wipe out your assets very quickly, especially if you require it for several years.

Some people believe that they do not have to pay for a long-term care insurance policy because they have a spouse that will take care of them or their kids said that they would take care of them.  Those are two very fortunate situations to be in!  But I would like to share my personal experience in long-term care.  My mother was diagnosed with dementia at the age of 71.  She had a host of other ailments such as osteoarthritis, rheumatoid arthritis and high blood pressure as well.  I had my mom move in with my sister and me, and we vowed we would take care of her for as long as she lived.  As her diseases progressed, it became more and more difficult.  Juggling work, home life, doctors’ appointments and care that she needed was not an easy task.  It was emotionally and physically tiring.  There were days when I was exhausted.  If it had not been for my sister living there also, I do not think I could have done it on my own.  It was definitely a two person task.  I lost my mom in December of 2011 and miss her each day.  Don’t get me wrong, it is something that I would do all over again in a heartbeat and I treasure each of those memories, but it did take its toll on me.  The reason that I am sharing this with you is to give you something to ponder and ask yourself: do you want to have your family member take care of you and have them rearrange their life to do it?  I think they would want to do it for you, but do you want to do that to them?  What if you don’t have a family member to count on?  None of these questions have easy answers.

If there’s one single event that is most likely going to affect your retirement plans, healthcare costs are probably it.  We can’t predict what they will be and although our healthcare costs have been rising each year for many years, we just don’t know how much they will be in our later years.  Due to this uncertainty, planning for your future healthcare costs is a critical component of your overall retirement strategy.

The next step is to determine if you want to purchase a policy and that depends on your age, health, financial ability, retirement objectives and whether you have assets you want to protect.  There are also different products that can be purchased to receive long-term care.  One is to fund the policy with a lump sum or the more traditional policy that you pay annually.  It is very difficult to compare these two because they are different products.

A fifty year old person that requires five years of coverage at age seventy in assisted living or skilled nursing facilities can expect to pay approximately $983,000.  The fifty year old has a choice – he or she can purchase a long-term care insurance policy to cover that potential expense for an initial annual premium of approximately $1,700.

Long-term care insurance is a complicated subject.  I would suggest sitting down with a financial advisor and discuss with them your concerns and your potential needs.  There is a lot to consider in purchasing a policy but a well thought out plan can make it an easier decision.



Carolyn Shott is a Financial Advisor with Raymond James Financial Services, Inc. in Melbourne.  Member FINRA/SIPC.  She can be contacted at (321) 723-3352 or Carolyn.shott@RaymondJames.com


Disclaimer: The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material.  The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  Any opinions are those of Carolyn Shott and not necessarily those of RJFS or Raymond James.  Expressions of opinion are as of this date and are subject to change without notice.  You should discuss any tax or legal matters with the appropriate professional.

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