Why should you consider long-term care?
Long-term care (LTC) is a topic that many individuals are either unfamiliar with or often trying to avoid. After all, how many people want to think about aging and losing independence when you are currently healthy, active, and engaged in daily life?
When I was first introduced to LTC, my mind immediately turned to memories of my grandparents and extended family in senior and assisted living facilities or hospitals. I had vivid memories of caring medical service teams surrounding my loved ones and helping them live to their fullest potential and with dignity. At the same time, I also recall circumstances, specific facilities, and experiences that I would never want my parents or other family members and friends to go through. I have shared these experiences with my clients to encourage them to begin considering their own preferences on how they would like to be cared for later in life.
In most circumstances, clients and their children express that they wished they had planned earlier for these situations. While at times difficult to discuss, we have found that starting these conversations early and revisiting the topic regularly enable families to voice concerns and opinions prior to entering a long-term care event. At Wolf Group Capital Advisors, we are committed to facilitating conversations on these potentially sensitive issues with empathy and care. Long-term care is a vital aspect of long-term financial planning and preparing for heightened medical expenses in your later years can bring peace of mind to you, your spouse, and loved ones.
One of our great founding fathers, Ben Franklin, wrote, “nothing can be said to be certain, except death and taxes.” As we continue to live longer and longer, it could be argued that long-term care be added to the list. The Administration for Community Living (acl.gov) states that “someone turning age 65 today has almost a 70% chance of needing some type of long-term care services and supports.” So, for most of us, it’s not a matter of “if” we need care, but “when and how much?”
To help you begin thinking about long-term care for a loved one or yourself, I have outlined below the most common questions we receive regarding LTC:
What is LTC?
LTC is a very broad term that involves a variety of medical and support services to assist individuals in the basic activities of daily living (eating, bathing, dressing, transferring, toileting, and walking). This can be for short periods of time or extended periods depending on the need. For many of our clients, these services help individuals stay in their homes longer, extend their ability to live independently, and lessen the burden on family or child caregivers at the tail end of their lives.
How much does LTC cost?
LTC costs vary based on where you live and what types of services are needed. In the Washington DC Metro area, costs can range from $27,000/year for adult day health care to $157,000/year for full time private nursing care.
Do I need LTC insurance?
There are two main reasons we encourage clients to consider LTC insurance:
- Risk of depleting retirement assets: It is not unreasonable to assume that a 2-3-year LTC event could cost $500,000 to $1MM in 15–20 years (from today). Therefore, it is important to ask yourself the following questions: could my portfolio absorb these costs? After my death, will there be sufficient assets remaining for my spouse or partner to continue living a comfortable lifestyle?
- Hedging for inheritance purposes: For many clients, we would consider their portfolios strong enough to self-insure if an LTC event occurred. However, even if you are wealthy, LTC insurance can be utilized as a powerful hedge to against spending down assets intended to go to children, charities or other heirs.
When should I start looking into LTC insurance?
Typically, it is recommended to begin researching and analyzing long-term care risk in your early to mid-50s. At this stage of your career, your long-term asset trajectory is coming into focus, you are beginning to have a better idea of what the next phase of your life could look like, and long-term care insurance policies are priced favorably in this age grouping. As you become older, costs tend to increase while the likelihood of underwriting approval drops significantly.
If LTC is something you would like to explore, please feel free to reach out to us at Wolf Group Capital Advisors, and we would be happy to discuss your financial situation and potential options to achieve your long-term goals.
Written by Kevin Ostergaard, Financial Advisor