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Subject:  Re: What My Financial Adviser Recommends Date:  5/28/2014  3:08 PM
Author:  2gifts Number:  75093 of 103771

* 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.

I've typically seen it phrased that if you have little money, you do not need LTCI because there are no assets to protect, and Medicaid will pay for your care. If you have a lot of money, you can easily pay for LTC out of pocket. It's the folks in the middle, which is where I am, that may need to insure for LTC.

* 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.

Unless you have Alzheimer's, in which case the stay is in the higher number of years, and so you do live for those 11 years. And if you leave a spouse, you don't want them to have to use all the assets to pay for your care leaving nothing for them to live on after you are gone.

"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."

We're paying $3600 for both of us for $150/day for an unlimited amount of days. I think that's a bit better benefit than what you have quoted.

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.

Because my policy will pay for longer than those 3 years, and if we need a 10-year stay, then that would be $600k, and that's a big hit. Even your $180k hit from that $1m portfolio is 18%, and from a board that often decries paying a financial planner a 1-2% fee, I'm surprised you think using 18% of the assets for one spouse is OK. I think that's a high percentage, and have decided to pay for insurance.

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

And for your situation, I'm sure this is a good decision. For my situation, however, I felt the best decision for us was to have the LTCI.

As always, YMMV, and folks should make their decision based on their own particulars.
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