The Evolution of Long-Term Care Planning

Long-Term Care planning

Our country will continue to have a seismic shift in the demographics and Long-Term Care planning will become even more important as it evolves.

Advisors continue to ineffectively approach future care and retirement planning. 70 percent of Americans over age 65 will require long-term care during retirement. Having no plan for it, will force them to pay for significant out-of-pocket expenses since they choose the "self-insure" route. It's highly appropriate for advisors to approach Long-Term Care planning asking this one simple question, "In the event you need Long-Term Care, what asset will you tap first to pay for care?"

The 5 Basic Assets

There are five basic assets that most clients own. It's important for consumers to understand what they are and how each can apply to their future needs.

  • Cash or cash equivalents
  • Retirement accounts
  • Life insurance cash values
  • Annuity cash values
  • Home equity

If home ownership or a reverse mortgage is a non-starter, then tapping retirement or investment accounts becomes the next largest potential option. At that point, a serious discussion regarding the consequences of that option is in order.

Problem No. 1 - Market Risk

Let's fast forward to 2034, when your 65-year-old client might need Long-Term Care in a nursing home setting, which projects to cost approximately $12,000 per month. If the care happens in the middle of a market correction of more than 20 percent - something that has occurred seven times since 1926, it could make a difficult decision worse. Each dollar taken out of that retirement or investment account will NEVER have market recovery!

Problem No. 2 - Retirement Income & The "Other Spouse"

Retirement income planning, based on a predictable level of income and expenses, makes a modest Long-Term Care need gravely impact the success of a plan. Using the example above, a two-year need for Long-Term Care could easily necessitate the withdrawal of hundreds of thousands of dollars from retirement or investment accounts to produce retirement income. It's easy to see scenarios where one spouse will have difficult choices to make after providing care for the other spouse.

Long-Term Care Solution

The majority of Americans are currently "self-insure" by default, and that means they are taking on an unlimited amount of risk. Implementing a long-term care plan would mitigate both of the previously mentioned problems; however, being proactive is paramount. Today, Long-Term Care Planning has evolved to using an approach that addresses and includes the critical issues of health care in retirement.

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