CMP Financial Planning

Why My Wife and I Decided to Buy Long Term Care Insurance



By Barry Jamieson

I found out that my wife and I were approved for long-term care insurance coverage – hurrah!   We sailed past arduous medical interviews and a memory test and apparently passed with flying colors!  We have thus officially prepared for embarking on our–hopefully– long and happy journey through our golden years.  Why would I be so happy about qualifying for long-term care coverage and voluntarily pay thousands in premiums for many years to come? Part of the answer lies in the fact that I work as a financial planner. My job involves working primarily with people who are contemplating retirement or have retired. It is important for these clients to know whether their financial plan will adequately support them throughout their retirement.  No matter what kinds of assets they have, however; there are always risks to even the best thought-out plans. Lower-than-expected stock returns, longer-than-expected life expectancy, fluctuations in interest rates that can affect bond prices, and new and unexpected health events are just a few examples of those hazards. An additional risk to most plans, which is often overlooked or underestimated, is the possibility of a retiree’s need for long-term care.   Since long-term care costs can easily exceed $50K a year, this expense can present a huge challenge and burden to any retirement plan. According to AARP, 52 percent of people who live past 65 will develop a severe disability that will make them dependent on long-term care, care that often spans multiple months or years. Many people mistakenly think that the government will step in if long-term care is needed. However, Medicare, the insurance coverage most of us will be receiving at age 65, only covers long-term care in a very limited way. Medicaid, a program for the poor and disabled, does cover the cost of ongoing long-term care but requires people to spend down all their assets before they qualify. Moreover, this program is under increasing stress as federal and state governments continue to wrestle with providing for the health care needs of an aging population. For special needs families, the idea of buying long-term care insurance when there are so many other pressing financial needs to consider for their loved one may seem like a fool’s errand; however, no family is immune to one or more family members potentially needing long-term care. The desire to leave some assets for the provision of the special needs child makes the planning for one’s own long-term care perhaps an even more urgent requirement. As mentioned earlier, long- term care costs can easily overwhelm one’s assets.
Which gets me back to my own story about buying long-term care insurance.  My assets are relatively modest, and although I would not mind leaving some inheritance for my children, it is not absolutely necessary. Each of my children has a job and is able to provide for themselves and their families.  Mine and my wife’s concern is that our financial plan cover the possible need for our own long-term care so that our children will not be burdened with that care when they are likely to be challenged with taking care of their own families. My wife and I are relatively healthy now and hope to enjoy many more years of healthy living as we approach retirement. As we reckon with our own vulnerabilities with advancing age, it is a relief to know that we have some protection in place in case we ever require long-term care services.   

References:1.     Nguyen, Vivian, AARP Fact Sheet Long Term Support and Services. 2017.https://www.aarp.org/content/dam/aarp/ppi/2017-01/Fact%20Sheet%20Long-Term%20Support%20and%20Services.pdf2.     Benz, Christine, Morningstar. August 2018.https://www.morningstar.com/articles/879494/75-mustknow-statistics-about-longterm-care-2018-ed.html3.     Genworth, Cost of Care Survey 2018. https://www.genworth.com/aging-and-you/finances/cost-of-care.html