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I read this article by Morningstar’s Christine Benz:
https://www.morningstar.com/retirement/youre-worried-about-long-term-care-expenses-lets-do-something-about-it
The article made me think that I don’t believe this topic that has been thoroughly vetted by HD participants. If you don’t have a long term care (LTC) policy how are you attacking the problem?
I must admit we have no specific plan to cover LTC expenses. I decided long ago that LTC premiums were not a good value. With the large increases in premiums over the years I think that was the right decision for us. I have heard of hybrid LTC/life insurance policies. Do any HD participants have such a policy? If so what are the particulars, and why did you choose such a policy?
Our potential sources of funds for paying for LTC are:
1) If we both wait until 70 to claim Social Security our combined income from SS is projected to be around 84K annually
2) Our portfolio is in excess of 1 million
3) Our house is paid off and the equity is slightly greater 500K
Both my parents and my twin brother required LTC for 1-3 years due to dementia. My parents did have a LTC policy that paid for at least a portion of their assisted living facility and their nursing home costs, my brother’s care was paid by Medicaid.
I’m normally an obsessive financial planner (we have not broached the subject in our occasional use of our fee only CFP) but I’m hoping that neither of us require LTC. The odds however are 50/50 one of us will, especially since we are in good health, affluent, and as I have written before the odds are my wife will live to 100+.
I’m hoping that if we do require LTC our assets will be sufficient without being financially ruined.
As it has been said though hoping is not a plan.
Savings and investing can resolve many of these challenges. In 2018, I retired after just 23 years of being actively involved in the market. At that time, I set aside $500K as an imaginary bucket for long-term care (LTC) expenses for both my wife and myself, but it was never truly segregated as a separate bucket. Everything remained invested within our overall portfolio. By staying disciplined and focused, I more than doubled our money.
LTC is too expensive with too many holes.
How much do you think long-term care insurance costs? The higher someone’s net worth the more sense it makes to own long-term care insurance. Only fifty basis points off of that one million could buy a long-term care policy with a million dollars worth of benefits.
What do you mean by “too many holes”?
Over 330,000 people will receive benefits from their long-term care insurance policies this year.
Our plan for paying for LTC is a bit different. We own 2 homes as part of our net worth. Although we still have mortgages on each, they both have significant equity. If one of us was to require LTC, we would sell one of the homes ( probably our beach condo) as using this second home wouldn’t be a priority for the other spouse and our family. Both the net proceeds from the sale and the elimination of the expenses (mortgage, taxes, HOA fees etc) would free up significant resources to cover LTC for a long time period.
After paying the capital gains tax on the beach home, and using the remaining equity to pay for care, which asset will you liquidate next? The problem with self-funding long-term care is that we don’t know when we might start to need care, we don’t know how long we’ll need care for, and we don’t know how long the healthy spouse will live after the first spouse passes away.