Dear Tom and Alan:
I’m going to turn the big six-oh this year.
Will soon be meeting with my CPA for taxes and she constantly tells me I should look into Long Term Care. In fact, her name is Constance.
Anyway, she tells me that when I get up to Medicare age I won’t be covered for “custodial” care.
The people I talk to say Long Term Care is way too expensive.
Is it? And what other choice is there?
Tom: OK, Boomer, I looked into a quote for a 59-year-old non-smoker in good health.
For a regular Long Term Care (LTC) policy, we put in a daily benefit of $250 for a period of three years with home healthcare at 100 percent. Also, each of the five plans has inflation protection from 3 to 5 percent. All plans assume a 90-day elimination period.
The rates for you, Boomer, go from $253.82 per month to $455.74 per month.
The way it works is, if your doctor says you cannot do two of the six Activities of Daily Living (ADLs) or if you have cognitive impairment, you would go “on claim.” After 90 days (your elimination period) you would start receiving benefits.
Al: There are so many variables in quoting LTC that the rates can change for any alteration in the details. The one you will always hear is that it just keeps going up with age.
One thing that surprises many people is that you have to be medically sound in order to get approved.
Tom: One of our general agents had a webinar on alternatives to LTC. Other than self-funding or life insurance with an LTC rider, the emphasis was on annuities.
Not everyone likes annuities: in the simplest form, you put in a chunk of money that you can’t touch for a number of years without penalty, then you can withdraw it later as ordinary income. If it increases in value, great, and when you die it goes to your heirs.
Al: The webinar talked about annuities from three different companies that included an LTC benefit.
The idea is still the same: you deposit a certain amount in an annuity; you get penalized if you take it out too early; but…you can get double or even triple the amount if needed for long term care.
For example, a $100,000 annuity could yield as much as $400,000 in LTC benefits. Of course, the first amount drawn is from your original $100,000. If you outlive that, you could very well use an additional $300,000.
Now, if you never use the annuity, you can withdraw from it later or leave it for your heirs. This also solves the problem of paying for an LTC policy for years and never using it.