financial planning and long term care 2016 june right blend investing
TRANSCRIPT
Financial Planning and Long-‐Term Care: Getting Started
June 2016
What Is Long-‐Term Care Insurance?
Definition: You pay an annual premium, and if you need long-‐term care the policy pays out a daily or monthly benefit.Doesn’t Medicare cover this?•Medicare and health insurance covers hospital care, and some home care, but only after hospitalization.•Medicare does not cover Activities of Daily Living (ADL). This is when a person needs help with bathing, dressing, cooking, cleaning, etc.
Medicare vs. Medicaid
• Medicare PART A, also known as the hospital insurance program, covers inpatient hospital services, skilled nursing facility, home health and hospice care. Only covers the first 100 days after hospitalization.• Medicaid offers long-‐term care, but qualifications vary by state and by facility. This requires detailed planning to minimize the impact on your taxes, estate, and your spouse/partner.
Sourceshttp://www.advisorperspectives.com/articles/2013/06/18/what-‐advisors-‐need-‐to-‐know-‐about-‐health-‐care-‐planning/3http://money.usnews.com/money/personal-‐finance/articles/2016-‐06-‐09/what-‐to-‐consider-‐if-‐you-‐may-‐depend-‐on-‐medicaid-‐for-‐nursing-‐care
Demand Is Rising as People Live Longer…
• A 55-‐year-‐old male has a life expectancy of 25 years• A 55-‐year-‐old female has a life expectancy of 29 years• A 65-‐year-‐old male has a life expectancy of 18 years• A 65-‐year-‐old female has a life expectancy of 20 years
Your genes, habits, and family history can make a big difference!
SourceSocial Security Administration https://www.ssa.gov/oact/STATS/table4c6.html
…But Costs Are Also Rising
• Rising Insurance Premiums: There have been dramatic rate hikes in the past several years. In 2016 the premiums in Pennsylvania more than doubled to $8,000 annually. So people either pay up or lose coverage.• Women: Women live longer than men, and insurance companies are allowed to charge women more. • Shrinking Options: In the 1990s over 100 companies sold long-‐term care insurance. As of 2014, only 12 insurance firms still sell it.
Sources:http://www.usatoday.com/story/money/columnist/brooks/2014/09/09/retire-‐long-‐term-‐care-‐insurance-‐baby-‐boomer/14968081/http://money.usnews.com/money/personal-‐finance/articles/2016-‐03-‐10/why-‐no-‐one-‐can-‐afford-‐long-‐term-‐care-‐insurance-‐and-‐what-‐to-‐use-‐insteadhttp://newoldage.blogs.nytimes.com/2013/02/06/for-‐women-‐reduced-‐access-‐to-‐long-‐term-‐care-‐insurance/
Estimating the Cost of Care and Insurance
Cost of careHere is a link to estimate the costs of long-‐term care in your state:
http://longtermcare.gov/costs-‐how-‐to-‐pay/costs-‐of-‐care-‐in-‐your-‐state/Cost of Insurance• I hesitate to put any number down since rates are rising so fast, and rates vary based on age, health, and gender.• The average premium in 2007 was $2,207 per year. I am guessing that the average premium has doubled by 2016. http://longtermcare.gov/costs-‐how-‐to-‐pay/what-‐is-‐long-‐term-‐care-‐insurance/long-‐term-‐care-‐
insurance-‐costs/
Sample Estimate of Costs
• This article from Nerd Wallet offers a good guide to LT Care Insurance. It has links to all of the companies that sell it, and it was written in June of 2016. https://www.nerdwallet.com/blog/insurance/long-‐term-‐care-‐insurance/
• According to this article, a policy covering $150 per day for three years would cost:• A 55-‐year old man would pay $1,015 per year• A 55-‐year old woman would pay $1,490 per year• A 60-‐year old husband and wife would pay $2,010 per year• Certain premiums are tax deductible; see the link above for details.
Hybrid Insurance
• New forms of insurance are available that combine whole life insurance with long-‐term care insurance.• This helps address a big complaint: Long-‐term care insurance has no benefits unless you use it, and people feel the insurance premiums are a “waste.” (That’s not true, but that’s how people feel.)• Hybrid insurance may be worth it for some people, but these contracts are complex, so do your homework before you sign.
Source: http://www.cnbc.com/2016/05/31/weigh-‐the-‐many-‐options-‐with-‐long-‐term-‐care-‐insurance.html
Other Options for Long-‐Term Care
• Continuing Care Retirement Community (CCRC): Down payment of $200,000 to $1M plus monthly fees. The decision depends heavily on your lifestyle and location preferences.• Self-‐financed care: A private nursing home costs $100,000+ per year, and a home health aide costs roughly $23,000 per year (20 hours per week at $22 per hour). You can pay from:• Investments• Income: Social Security, pensions, annuities, etc.• Home equity
• Medicaid: Often the last resort, especially given the impact on estates
Keep This in Mind: Tools for Seniors Are Improving• There is a wave of innovation that is helping people remain independent, mobile, and socially connected.• The Baby Boomer market has tremendous buying power, and this creates strong demand for products and services that help seniors with daily activities.• Small changes in a living space can make a big difference (grab bars, raised seats, etc.)• Hiring occasional help is also an option (heavy cleaning, moving furniture, etc.)
Next Steps
1. Think about your goals
2. Learn about the trade offs
3. Consider how you feel about different lifestyle options
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