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Investing/Strategies / Retirement Investing
|Subject: Re: Long Term Care||Date: 3/27/2011 11:01 PM|
|Author: Rayvt||Number: 68742 of 76095|
Having $1M in assets that you can tap to fund your retirement is only about $40k per year if you use a 4% SWR. What happens to the other spouse if you then need to use this nest egg to for one spouse's long term care?
I guess you'd have to read the detailed analysis in CR. I'm assuming that they *do* show such.
Just as a S.W.A.G.: $5000/mo for Alzheimers ward (we paid $4000/mo in 3005 for my Mom). is $60K/yr. The delta is less than that, because some of the 5K is for food, etc. But even ignoring that...
That's 6% of $1M or 4% of $1.5M. A tad high, but the life expectancy of someone in that condition is not going to be more than a few years.
If they were using the entire $40K to live on, that will drop to maybe $30K, for a total of 90K, or 9% of 1M or 6% of 1.5M or 4.5% of 2M.
But the 4% SWR is computed for a 30 year survival period. To be blunt, nobody is going to live in a nursing home for 30 years.
But let's ignoring portfolio survival, and ignore growth, ignore earnings, say in this situation you'd hit the panic button and go to cash to ride out the storm.
A $1M portfolio where you take out 90K per year will last 11 years.
At 45 years old, you'll pay premiums for 20 years just to get to 65, and perhaps another 10 years before need.
That's a long time in which to build up your own portfolio to self-insure LT care.
I guess different people view things differently. Some people hear about LTHI and start paying premiums. We heard about it and decided to aim for a $2M retirement portfolio.
But I've always wondered---what if you die early? Is any of the premium returned? According to the SSA, only 75% of 45 year olds are still alive at 70.
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