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Subject:  Re: What My Financial Adviser Recommends Date:  5/28/2014  2:55 PM
Author:  Rayvt Number:  75090 of 104387

How can there be one "magic number"?
By considering alternatives.
* If you have only a little money, you need LTCI for protection.
* If you have a lot of money, you can easily pay for LTC out of pocket.

Some other considerations:
* All LTCI policies come with caps, both per-day and per-year(life?). Those caps seemed pretty low compared to the premium.
* Premimums are not fixed. Premiums can go up a lot, and you have no control over it.
* I read that "the average private nursing home room costs $87,000 a year" -- 1,000,000 / 87,000 = 11 years.
When my Mom went into an Alheimers unit it cost $5000/mo. $1,000,000 / ($5000 * 12) = 17 years.
And if your health is so poor that you need to go into a nursing home, you are unlikely to live 11 or 17 years.
* You can't afford to insure for every possible worst case -- the premiums would be unaffordable.

A figure around $1M or $2M seemed to be the crossover point.

We need more than $1 million to be able to sustain the lifestyle we plan to have in retirement for the number of years we expect to live in the area in which we currently live, and so that number most certainly doesn't work in our case.
You are mixing two different issues. Sustaining the lifestyle to which you are accustomed is a _preference_ issue.
If one of you has to go into LTC facility, that's _emergency_ mode. When you have an emergency situation, prefererences go out the window.

in a nursing home for over 10 years because of Alzheimer's, and she ended up with nothing after paying for his expenses after he died...
Would LTCI even cover this? Did they start with $1M?

I found this from a 2012 article:
"The American Association for Long-Term Care Insurance says people should expect to pay an average of $3,335 per year to cover a couple of healthy 60-year-olds on a plan that pays out a $150 daily benefit ($4500/mo) for up to three years."

That's the kind of math we engineers ran through.
$5000/mo for 36 mo = $180,000
Everything after the 3rd year has to come from your pocket, the insurance has paid everything it will.

So what you are insuring for is just $180,000. Why bother? If you have $1M, the total hit of $180K is minor.
It's only the first $180K that you have to worry about --- everything over $180K has to be paid for out of your own pocket anyway. I would submit that there is no substantive difference between $1,000,000 and $820,000 -- especially considering that the total premiums you paid are likely to be a large fraction of the $180K. You are not so much buying insurance as pre-paying for the LTC.

We were around 40 when they held these sessions. The premiums at 40 are a lot less than at 60, so say our premiums would have been $150/mo or $1800/yr.
40 to 65 is 25 years. If you save & invest that $150/mo and earn 9% for 25 years you'd have $169K.
But a LTC claim is more likely to be age 75 than 65, so after 35 years you'd have $445K.

After considering all that, this is why we decided to forego LTCI and focus on saving & investing to get to a $1M portfolio.
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