By Roy Larsen, CFP®, AAMS®
While it is important to have a well thought out health strategy for health’s sake, it is also vitally important for protecting assets that maintain your retirement lifestyle and the lifestyle of your spouse that depends on those assets as well.
Many already know that Federal Medicare doesn’t cover everything and that some form of supplement will be required. Although this may change down the road, the current outlay for supplements and related out of pocket costs won’t break your budget. The larger misstep comes when we address potential long term care.
Very often the same person who in one regard wants to spend their assets quicker because
they don’t think they will live that long, now turns into superman when it comes to possible Long Term Care. We men are the worst offenders. We never think anything will happen to us. As financial planners we hear it all! “I feel great”. , “People in our family simply drop dead”. “If anything happens to me, I’ll make my wife shoot me.” “50 is too young to purchase Long Term Care, I’ll wait until I’m older”. All of these brilliant lines and many more have graced my ears! Let’s face it, who wants to buy more insurance? I know I don’t. There is nothing worse than spending money for something you may never use! The reality is proper planning is about having a response for all of life’s what ifs and longer life spans have made this topic crucial to protecting your way of life.
I tell everyone that of all the insurances you possess, Long Term Care is the one you will most likely use. If you’re going to bypass this one, why bother with any of them? Let’s look at the raw numbers. 2 out of 3 people over the age of 65 will require Long Term Care¹. The average length of the majority of Long Term Care claims is 3.8 years². The average life expectancy after an Alzheimer’s diagnosis after age 70 is 4 to 7 years³. 40% of Americans will need Long Term Care between the ages of 18 and 64⁴. Average annual costs are running from $37,572 for assisted living to $79,935 for a private room⁵.
Staggering numbers to say the least and to add insult to injury, many Americans falsely believe that these costs will be covered from other sources. 54% believe that Medicare covers Long Term Care…..it does not! 46% believe that Medicaid will pay……..only if you have exhausted most of your assets( I say most because new partnership Long Term Care plans in Georgia help protect a certain amount of assets from Medicaid)and I promise you, the facility will not be your favorite! 44% believe that their traditional health insurance policy will cover it…..again, no⁶.
The good news is, today there are numerous ways to address this vital need based on your personal situation. If assets are limited, you may want to consider traditional Long Term Care insurance. You can structure a policy in many different ways to fit your budget and if money is tight, having some coverage is better than none at all. There are also many asset based products that combine insurance or investments with Long Term Care riders. These solutions may be best if you have assets that you won’t be using right away and provide other benefits that you will use at some point. This is ideal for those who may not want to pay annual premiums for something they may never use. Everyone’s situation will be different and I encourage you to call me or your financial advisor for more specific solutions and strategies. In closing, a health care strategy is paramount to retirement success. Avoid the cardinal retirement mistake of rationalizing scenarios that you can’t control!
¹ US Dept. of Health and Human Services National Clearinghouse for Long Term Care information website, May 2010
² Genworth Financial claims data, 2009
³ National Institute on Aging, National Institute on Health, 2/09
⁴ Life and Health Insurance Foundation for Education
⁵ US Dept. of Health and Human Services National Clearinghouse for Long Term Care information website, 2010
⁶ Strategy One National Survey, 2007
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment (s) may be appropriate for you, consult your financial advisor prior to investing.
Roy Larsen, CFP®, AAMS® is a Fee Only Certified Financial Planner practitioner and acknowledged fiduciary. He works with clients in the Gainesville, GA. area outside of Atlanta and throughout the United States. Larsen Wealth Management specialized in the distribution phase of retirement or your version of chapter two. Roy has been quoted in the Wall Street Journal as well as the New York Times and has won the 5-Star Professional award for 6 consecutive years as one of the top Wealth Managers in Atlanta. Roy can be reached at 678-696-8755 or roylarsen @investinretirement.net.
The opinions voiced in this material are for general information purposed only and are not intended to provide specific advice or recommendations for any individuals(s). To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Roy Larsen is a Certified Financial Planner™ practitioner and Fee Only Wealth Manager who resides outside of Atlanta, Georgia.
Roy's Financial Blog contains articles on multiple financial life events as well as his favorite questions from he receives from around the country as a an expert panel member for Investopedia's Advisor Insights.