Long Term Care – The Biggest Financial Disaster Baby Boomers Face

INTRODUCTION …

Getting old is scary. The oldest of us boomers turned 60 in 2006, yet many of us are in a state of denial when it comes to aging.

And when it comes to possibly needing long-term care (LTC), you might take the attitude, “Well, that’s not gonna happen to me.” Baloney! The fact is that long-term care is the biggest financial risk many of us face and most of us are not prepared. We worry about protecting our lifestyles, incomes, homes, cars, boats, and possessions from financial loss. Yet too many of us don’t have any plans for how to cover the biggest expense we could face. And do you think this is a problem that doesn’t affect the wealthy? Hogwash … Northern Trust conducted a survey of households with $1 million or more of investable assets. They found that the participants believed rapidly rising health care cost was the number one potential obstacle to enjoying retirement. Let me ask you: Are you among the boomers who will retire in their early 60s? With life expectancies ever rising, there’s a darn good chance that you’ll live into your 80s, 90s, or longer after you retire. So what can you do to make sure a sickness or an injury over the next 20 or 30 years doesn’t leave you, your spouse, or your heirs with nothing but bills? A Severe Lack of Knowledge

About Long-term Care …

A 2006 survey sponsored by the John Hancock Life Insurance Company included a 10-question true/false quiz about long-term care basics. The majority of respondents got only four answers correct! Look. You don’t need to become an expert. You should, however, make sure you are in the minority of boomers who understand long-term care issues. In addition, you need to know what questions to ask … whether you are talking to a caseworker from Medicare or an insurance agent. Because if you don’t know what to ask or don’t understand the basic terms, you will be putting yourself at a huge disadvantage. For example … The Costs. Some of the prices listed for daily long-term care are more than you’d pay to live in a five-star hotel. They are just the averages for their communities. And it just might be average care, too! Yet you might not want to settle for average care. That’s not all … How do you feel about sharing a bathroom or TV with other residents? Hey … what if they snore? The Odds Are Stacked against You. A study noted in The Wall Street Journal determined that if you’re 65 years old, there’s a 69 percent chance that you’ll eventually need long-term care. And if you need long-term care, there’s a 37 percent chance you’ll need the type of care provided in a nursing home or assisted-living facility. Nevertheless, long-term care doesn’t necessarily mean nursing home care. A Woman Is at Greater Risk. It’s real simple: Women have a bigger problem than men because, statistically, they live longer … an average of five years longer. Spend some time in a nursing home. You’ll come out with this conclusion … The majority of long-term nursing home residents tend to be single, female, over age 80, and suffering from dementia. They don’t have any family support and are unable to live independently. Your choices Self Insure

What is your check writing tolerance level? With the average stay in long-term care of 2½ years at $75,000 per year, how might you feel writing a check for $187,500? Or what if you and your spouse both need care? $375,000 is a big number for most people. And these are just averages. Can you write that big of a check without your hand shaking? Rely on Family and Friends. Providing unpaid home health care can obviously be a significant burden on those who are trying to balance personal responsibilities with work demands. These caregivers may feel isolated from their friends and overwhelmed by their responsibilities. The result can be high stress levels, depression, and physical ailments. Bottom line … If you have friends or family who you think would be able to provide proper care and would be willing to put up with you when you’re old … sick … and cranky, then that is the way to go. Rely on the Government. There are two sources of government assistance for long-term care. Medicare pays if you are medically needy, and Medicaid pays if you are financially needy. To get Medicare, your doctor must have ordered daily, skilled care. Bottom line … You must be in pretty bad shape to get Medicare’s limited, short-term help with your long-term care expense. You can read about the process on the Web site listed in the Appendix. And to get Medicaid, you have to be just about broke. There are ways, however, to transfer assets from your name in order to qualify for Medicaid. If you want to look further into Medicaid planning, a good reference book is listed in the Appendix. Bottom line … The government has become more concerned that wealthier seniors who have the means to pay for their own care are abusing the system. Therefore, it will become increasingly harder to implement Medicaid planning.

Tap Your Home Equity There are three ways to use your home’s equity to pay for care … One could let you to retain title and ownership of your home while giving you a choice of three income options. Long-term Care Insurance (LTCI). Long-term care insurance is a popular subject with many older people. Often this is because they have frequently seen friends or relatives impoverished due to the high cost of long-term care. And you too, might have experienced an aging parent who needed help with daily activities at some point during their lives. If so, were you or your spouse able to give up an established career with a regular paycheck in order to become their caretaker? Probably not. Yet despite the negative consequences, only 16 percent of men and 14 percent of women, age 50 and older, report having a long-term care insurance policy. Ask yourself then: How do you plan to remain independent, preserve your freedom of choice, and protect your assets if your health changes after retirement?

What to Look for in a Policy Selecting a LTCI policy is not easy-it takes work. Even with an agent’s help, you must understand the various terms and benefits, as well as comparing costs. There are 12 important features to understand before you plunk down your hard-earned money. How to Stay Out of a Nursing Home If you needed long-term care, where would you prefer to receive it?

A. In a nursing home

B. In an assisted living facility

C. In your home The answer for most people is, of course, “C”, the home. That’s probably why six times as many elderly people with disabilities live at home than in nursing homes. And there are 13 points you should review so you can implement a nursing home avoidance strategy and have control over where you receive care. Other funding ideas. Besides taking the premium dollars right out of your pocket, there are other ways to find the money to buy a long-term care insurance policy. One will pay you a guaranteed income for a preset number of years or your lifetime. A second strategy is designed to help you save for future medical and health expenses. Find the right plan. It’s important to make sure you can comfortably afford LTCI. Otherwise, you might end up dropping the policy in a year or two. Then you’re no better off-plus you’re older and may have developed health problems that could make insurance more expensive or unobtainable. And with all the choices available, there’s no reason for not coming up with a plan that meets your needs and budget. Do you still need life insurance to provide for your survivors? If so, there are two ideas you should consider. How about estate planning? One LTCI strategy can help reduce the estate tax bite for your heirs. Could you use an income tax deduction? There are two ways to have Uncle Sam help pay your LTCI premiums. Get in on The Government’s plan

The government has a special long-term care insurance plan that could let you keep up to $250,000 of your assets and qualify for Medicaid. What If You Don’t Qualify for Insurance. Suppose that you and your spouse apply for insurance, but you’re rejected because of a chronic health problem. Don’t take the attitude that if both of you aren’t good enough, the insurance company can just take their policy and … There are four much better solutions. Agent or Not. There are hundreds of different LTCI policies available from dozens of insurance companies. And you can get many of them from insurance agents and financial advisors. Or you can go online and shop around yourself. But an experienced agent can contribute five important aspects to the table. How to justify not buying LTCI. The following are excerpts from e-mails received after an article on long-term care insurance ran in an online publication.

Hypothetical Case study. Fred is 58 years old, single, and healthy. His parents are in their 80s and also in good health. Fred’s insurance agent gave him three LTCI proposals. We’re going to go through the LTCI worksheet to watch Fred and his agent choose a policy. Helpful hint: Refer to the Index if you aren’t sure about the information requested on the form. And next, we’ll review each section.

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