In the days before coronavirus, the crisis on financial planners’ lips was the long-term healthcare variety.
Our concern was how clients could fund the costs, already elevated and rising, of nursing home, assisted living or homecare in the event of short-term or permanent disability in retirement. Coverage is widely available and while the average premium has climbed in recent years, most of our customers can find an affordable plan.
The decision to fund LT care seems simple at first. Calculating the odds of needing care – evidence suggests around 70% of Americans will require it – and estimating the costs are the first steps. But there’s much more to consider, and effective advisors should prime themselves for the necessary conversations with customers.
A classic concern for seniors revolves around the issue of self-reliance. Government aid is available at the federal and state levels and family members are often eager to help, to the extent that they can, but elderly citizens would rather go it alone. No one wants to be a burden or surrender control of their lives, simply because they’re aging. This simple notion commonly underpins the desire to purchase a LT care policy.
Most elders will need long-term care at some point. Three years is the average cumulative total of the amount of care needed, with men requiring 2.2 years and women, 3.7 years. Twenty percent of the population will need more than five years of LT care during their lives.
When asked, most senior citizens will say they’d rather spend their retirement in their own home, and if care is needed, family members are the preferred source of aid. Their children and close relatives would probably agree, but the cost can be high. An estimated 80% of seniors needing homecare today are assisted by relatives or friends, all unpaid. Studies suggest the opportunity costs for devoted caregivers are staggeringly high, reaching $300,000 in lost wages over the lifetime of an elderly relative.
We think most clients would blanche at the idea of causing their loved ones such harm. Long-term care insurance provides security for the policyholder, and provides assurance that relatives won’t face crippling losses for their simple love and devotion.
An alternative to LT insurance is to estimate the amount of money needed for care, and sock it away as part of one’s retirement plan. Evidence suggests that most seniors (63%) will never have to pay out any cash for LT care expenses – government programs, unpaid caregivers and LT insurance tends to cover the bills. For the large uncovered minority, though, the bill can be dizzyingly high.
Assisted living averages nearly $50,000 per year, and can cost a great deal more, depending where you live and the quality you require. A paid homecare aide costs even more, while nursing homes top $100,000/year. Couples and individuals with seemingly substantial savings can quickly find their accounts drained of funds they hoped would provide a secure and happy retirement, to say nothing of providing a legacy to loved ones. LT care insurance can protect these assets.
When considering healthcare options, choice is key. Without long-term care coverage, choices will likely be narrowed to facilities and treatment options unpleasing to most clients. The solution is simple enough in conception: savings and insurance, taken together, can provide a comfortable range of healthcare options to clients.
Independence is always important in life, but never more so than in the senior years, when health and happiness are particularly valued commodities. We recommend speaking to clients, particularly those around the key age of 50, about long-term healthcare policies and the critical role they can play in their retirement plan.
For more information, please read:
The Real Reasons People Decide to Buy Long-Term Care Insurance | Kiplinger