Finance

Your Long-Term Care Questions Answered

Your Long-Term Care Questions Answered

Thank you for sending me your long-term care questions. It is a topic that I have much passion around and unfortunately many people delay having these important conversations with their loved ones, which is a common and avoidable mistake. You want to get in front of the issue and figure out how you or your loved ones will be cared for before you (and they) actually need the assistance.

PLEASE NOTE: I do not know the details to each of your situations and may not be licensed in Long Term Care in your state. These are general answers to questions received and should not be taken as direct advice on your individual situation. Answers are only my opinion on a general question. You should always consult a licensed financial professional in your area.

I’m in my 40’s and single. I’m working hard at getting my retirement savings in shape and haven’t even started thinking about long-term care. Any advice for a single professional with fluctuating income? Should retirement savings remain the priority?

Saving for your retirement is really important, and part of planning for retirement is also planning for the uncertainty of a long term care need. You can save diligently and run out of money due to needed care that was not planned for. The “sweet spot” for LTC insurance is in your 50’s. Unfortunately, a long term care event is not just for the elderly. A need could arise due to a long term illness or an accident. As a single person, I believe the need for this type of insurance is really important. It shouldn’t trump your retirement savings but needs to be considered a part of it.

I know life insurance is typically recommended when you have a spouse and/or children, but what about long-term care? Is there any benefit in getting it in your 20s, 30s, or 40s versus 50s? Is there anything I should be doing regarding long-term care in my 20’s and 30’s?

Long term care is generally looked at in your 50’s. Unfortunately, an accident or an illness can warrant its need much earlier. If you have a life insurance need, you may want to consider a company that offers a Long Term Care rider on the life insurance policy. This would allow you to use some of the death benefit for a long term care need, which is a great way to address several concerns/needs in one policy for those younger than 50.

My parents are in their 80’s and are in good health. When I talk to them about long-term care (I assume they would not qualify for long-term care insurance at their age) they get upset and point out how healthy they are. I’m not sure how their financial situation is as they are pretty tight-lipped about it. Any advice on how to get them to open up? Or what we should do to prepare ourselves if they need our financial assistance?

How wonderful that they are in their 80’s and feeling good! It is hard to address money issues in a family that has not had open conversations about money, but with a little patience you can get them to open up. If you’re comfortable doing so, I would sit down with them and let them know that you would like to understand their financial situation as it pertains to the need for long term health care. I would also ask about their estate planning wishes and if there are good documents in place. I know this will be uncomfortable and I assume you have a good relationship with them. I work with families daily that put off these conversations, and it causes YEARS of work for the surviving children. Let them know that even though this is not a comfortable topic, it would really help you to know what their wishes are so you can honor them. You are seeking to understand out of a place of caring, not greed.

We already have lots of insurance (health, home, life, auto, etc.) and long-term care insurance is expensive. So I guess what I what to know is what are the pro’s of long-term care insurance over investing money to pay for long-term care costs? How much money should I set aside for long-term care needs?

I too have LOTS of insurance, but I have also been working with clients for 23 years and have had many claims on LTC policies. I have had mine since age 39 and would not miss a payment. It is getting harder and harder to get and the cost continues to rise. The cost depends on where you live and the type of care you may need. At this time, the average cost of LTC is about $250 a day or $91,250 a year (and that is on the low side for many large cities). According to the American Association for LTC, 50% of people who buy LTC policies prior to age 60 claim on those policies. The current average stay is 2.5 years, and can be much longer with dementia. If you are going to set aside retirement money for LTC, I would personally make sure I had at least $500k in today’s dollars. It is not just the cost, it is the coordination of care (which is exhausting if you have had to do it). A good policy would help with that as well. Statistically, a long term care need may cost you far more than a car crash and maybe even more than your house burning down, but we all insure for those possibilities!

When and if my parents require long-term care assistance, they will qualify for Medicaid pretty quickly. Should I help pay for their care or is it better to let Medicaid step in? I don’t want to be a bad child and will help out, but I also can’t afford to bankrupt myself either. Is it more logical to let Medicaid cover long-term care costs and I help out with costs Medicaid doesn’t cover? What might some of those costs be?

If they qualify for Medicaid, I would allow the system to provide the care. It is a tough system to navigate and you will have to really be their advocate. You will not help them by sacrificing your retirement because now who may be put in a position to help you in your retirement or with your long-term care needs – your kids. Any money you give your parents will offset benefits. Show your love by being their advocate in a burdened system where they could fall through the cracks.

How does long-term care insurance work? What causes people to be denied coverage? What happens if your long-term care insurance doesn’t cover costs? Or runs out?

Long Term Care insurance is generally purchased on a daily rate bases. For example, you buy a policy that covers $250 a day, up to a total of 1,825 days/5 years. Most policies have a “pool” of money and you may have more days if you do not use the entire $250 a day. Many times care is more custodial at first and then goes to more skilled care so benefits can last longer. Every company does its own underwriting, and there are many reasons that policies are denied. In most cases, it has to do with a history of something that traditionally will cause a LTC need. Examples include but are not limited to: diabetes, arthritis, cancer, heart conditions, and foot problems. When the policy runs out, you will need to use your assets to continue care. Some states have a “Partnership” agreement that provide asset protection if the policy holder’s benefits run out and they need Medicaid assistance. Be careful, not all states offer this and even in the states that do, you need to have a policy that has been written in Partnership with the right benefits.

How long is typical stay at a nursing home? We have family members in poor health who will likely require full-time care. We are looking into long-term care insurance for ourselves but the options seemed limited and didn’t start covering costs right away. Is that typical? What should we look for in long-term care insurance?

According to the American Association for LTC insurance, the average stay is 2.5 years. If you are single, it is higher at approx 3.5 years (no spouse or children who may start as the original caretaker until the level of care required exceeds their abilities). Typically, there is a 90 day waiting period for benefits, so plan on paying out-of-pocket initially. I would research your area for cost associated with long-term care. I would base the amount and type of coverage on those anticipated costs. It’s important to remember that these costs are increasing yearly, and I believe it is important to have a COLA on the benefit to “keep up” with inflation in this area.

In a situation where the elderly parent requires long-term care, but they cannot afford the costs, are there any state/federal programs that one can apply to for financial assistance beyond Medicaid?

When my father-in-law was in need of LTC and financially qualified for Medicaid, we worked in our local community to find several services for the elderly that provided some assistance. He was also a veteran, and we received some services through the veteran’s hospital. It took hours of research and advocating on his behalf, but there may be community programs that can help offset your costs. We still had to step in financially at times, but the resources we found in our local community were invaluable.

Don’t Be Afraid to Ask for Professional Help

As you can see, long-term care is complicated and I cannot foresee it becoming easier as our population continues to age. It’s also important to note that Medicaid is run by the individual states, so you want to make sure that when you assist your parents (and yourself) that you follow their state’s program rules. An elder care lawyer and financial advisor located in the state where you (or your parents) live can be also be a huge asset and help you create a long-term care action plan.

Shannon

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September 5, 2014  •  11 Comments  •  Finance

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  1. Friday, September 5th, 2014
    In regards to getting parents to open up...This is a real tough one but like you said that discussion has to happen. It's understandable that our elderly parents don't want to talk about this...they are approaching then end of their life (not that any of us know when we are going). It forces them to face the reality that not many more years remain...I'm sure when I reach that age it will be tough for me to handle. Always approach that conversation with a loving spirit with the purpose of doing good for all those involved.
    • Shannon Ryan
      Monday, September 8th, 2014
      It definitely can be tough to get parents to open up. As you said previously, sometimes it's hard for parents to accept some role reversal and when you add in confronting their own mortality, it can make it doubly hard. I think if you can take it slow, be patient and make it clear that you're asking out of love and a desire to honor their wishes can help them feel more comfortable opening up.
  2. Friday, September 5th, 2014
    Thanks for taking the time to answer my question! I think getting life insurance with long term care rider on the policy seems like a good option. I'll look into it when I purchase life insurance (any day now...).
    • Shannon Ryan
      Monday, September 8th, 2014
      No problem, DC. It's a great question and I wish more people your age where thinking forward. :)
  3. Saturday, September 6th, 2014
    Thanks for addressing these important questions. I feel like the first one could have been written by me. I've gone back and forth on considering long term disability insurance, but with my level of income it's been hard to think about because I have very little wiggle room in my budget. Its a gamble, unfortunately. Sad it has to be that way. Maybe I'll move to Europe. :)
    • Shannon Ryan
      Monday, September 8th, 2014
      It is a tough call when your budget doesn't have much wiggle room. You still also have some time too, so as your job situation stabilizes, long-term care insurance may now fit your budget.
  4. Sunday, September 7th, 2014
    Thanks for all those questions. We really need to decide within the next few years if we want to purchase a LTC policy. I'd hate to have everything we've worked for go to nursing home care.
    • Shannon Ryan
      Monday, September 8th, 2014
      That's the question people have to ask themselves. We work so hard to for our money and most of us want to leave behind some sort of financial legacy. We overlook how costly long-term care is and don't plan for it.
  5. Friday, September 12th, 2014
    These were some really good questions and answers. I have had some of the same questions.
    • Shannon Ryan
      Monday, September 15th, 2014
      Thanks, Michelle. I'm glad they were helpful and answered some questions you had!
  6. Friday, October 24th, 2014
    it can be really tough to have this kind of conversation with you parents. Especially my parents because they turn everything into a joke having a serious conversation about this is pretty tough.
Shannon Ryan SHANNON RYAN, CFP®
  • Meet Shannon

    "As a Certified Financial Planner, it is my passion to help individuals and families build a healthy relationship with money. I look forward to helping you raise financially confident kids.” - Shannon Ryan
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