No. of Recommendations: 2

New York Times, July 8, 2013
High Disability Rates Persist in Old Age

Gerontologists once hoped for a “compression of morbidity”; the idea was that we could remain healthy and active until our bodies fail at advanced ages, and we swiftly died. But new research shows that this has not materialized for most of the elderly. The price we’re paying for extended life spans is a high rate of late-life disability....

The numbers, based on interviews with more than 8,200 adults over age 50 who died from 1995 to 2010:

– Two years before their deaths, 28 percent of people were disabled, defined as needing help with an activity of daily living like bathing or dressing or using a toilet. Of those, 12 percent reported “severe” disability, meaning they needed help with three such activities or more.

– The disability rate rose markedly with age. Of those who died at ages 50 to 69, only 15 percent had been disabled two years earlier. Of those who died after reaching age 90, half had been disabled....
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Disability (physical and mental) is a costly Macro issue and also a personal finance issue.

The cost of care for a disabled person is much higher than a person who is capable of self-care.

The issue of Long-Term Care Insurance (LTCI) was discussed on this board recently. Many have concluded that LTCI is not worth buying, for good reasons.

The high rate and length of disability is an important data point. If a person's family history indicates long life, they have a 50% chance of becoming disabled.

DH and I have just purchased LTCI, using a 1035 exchange from whole-life insurance that DH purchased before we met. We do not have children and I don't need the death benefit (in the event that DH were to predecease me, which I hope won't be the case). The dividends and cash value of the whole-life insurance will be tapped to pay for the LTCI. If DH lives until age 99, the death benefit of the whole-life insurance would be minimal.

We did not purchase an inflation rider because of the cost. We expect the cost of long-term care to rise, and the LTCI will pay for a fraction of it, with the rest coming from our other assets. Like 2gifts, who explained her rationale for buying LTCI, I consider this is a piece of our retirement puzzle.

The underwriting process was strict. We turned over our medical records and a nurse came to our house to measure DH's blood pressure (which, like mine, is normal.) Like all insurance, we hope never to need to use it. But it's nice to know it's there. The rate of disability is much higher than, say, the rate of house fires...and I buy homeowner's insurance.

Specifically, each of our LTCI policies will take $1350 per year from the whole-life insurance, lowering the cash value and death benefit. This will provide a total of about $250,000 apiece ($7K per month for 3 years) of LTCI with a 90-day exclusion period.

Without the whole-life policy to fund the LTCI, I would think twice because it is expensive. I think that the vast majority of people would not spend money on LTCI. Just think of the tens of millions who can't even afford health insurance, let alone insurance for decades in the future.

Those who fall into the "middle range" of assets (as explained by 2gifts) should carefully consider their family life expectancy and the potential for disability needing LTC.

Wendy (cross-posted to METAR)
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