Advice Requested: LTCi or Paydown Mortgage

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Topic Author
L82GAME
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Advice Requested: LTCi or Paydown Mortgage

Post by L82GAME »

Hello,

For context, this question is relative to my previous post about our portfolio and retirement: viewtopic.php?f=1&t=298167&p=4904151#p4904151

Specifically, my wife and I have been shopping for LTCi policies. Here's the quandry:

On the one hand:

-LTCi insurance policies would provide a currently valued combined max. benefit of $300k, or $150k for each spouse, for a period of defined years, not for a lifetime.
-Policies allow for unused benefits to transfer to the other spouse.
-Policies would have a 3.25% annual inflator.
-Policies require the typical benefits triggers of inability to perform two ADLs, or continual supervision required due to cognitive impairment.
-Both in-laws have dementia/ALZ. This puts my wife at higher risk.
-Coloring my view of the decision is that my in-laws have LTCi policies. Try as we might, we cannot get them qualified for benefits either because they cannot demonstrate the inability to perform 2 ADLs, or can they can't demonstrate that they require constant supervision due to being a harm to selves or others. Therefore, while continuing to pay LTCi premiums for no benefits payout, they are also paying Visiting Angels out of pocket. Maddening.

On the other hand:

-Due to the difference in ages between my wife and I, our current retirement plan is that my wife would retire at 65 and not collect SS until 67. I would retire at 62 and not collect SS until 70. This would have us both working full time until our daughter completes college.
-Our odds of successfully retiring full-time into our nineties increase if our mortgage is paid off eight years early when I retire at 62.
-Current home value is $318k. ~21 years left on mortgage. ~20% equity. Fixed rate of 3.75%

Questions:
1) Do we purchase LTCi?
-or-
2) For the amount we'd pay monthly in LTCi premiums, do we instead apply additional principal-only payments monthly to our mortgage and have 100% equity in our home when I retire at 62? Equity could be tapped for LTC needs.

Current savings rate and discretionary needs do not allow us to pay both LTCi premiums and paydown our mortgage eight years early. Our current pre-tax savings rate is 19% of gross household income.

Thank you for your consideration.
“Simplicity is the ultimate sophistication.” - Lao Tzu
mhalley
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Re: Advice Requested: LTCi or Paydown Mortgage

Post by mhalley »

My understanding is that you don’t consider ltci until you are about 60.
Because LTC insurance can be costly, you typically want to buy it in your late 50s to early 60s. By then, your children should be grown, which frees up some of your cash flow in your life. Yet you’re also young enough that you can pass medical underwriting for a policy.

So late 50s to early 60s is really the sweet spot for buying LTC insurance.

If you’re tempted to lock in a lower rate by buying a policy earlier, Clark says don’t be. Since too many companies made promises of coverage that were too generous in the past, the market for LTC insurance is going through some pain at this time.

“Right now, there’s no advantage to buying LTC insurance early because the market’s pretty messed up right now,” the money expert notes. “Give it time to get more stable.”
Clark Howard’s ltci guide

https://clark.com/insurance/what-is-lon ... t/#LTCtime
GeoffD
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Re: Advice Requested: LTCi or Paydown Mortgage

Post by GeoffD »

In my opinion, a LTC policy for $150k per spouse is pretty much useless. My mother is in memory care. I write the checks. That’s 18 months and then the policy is exhausted. In a skilled nursing facility in a high cost of living region, you’d blow through that in less than a year. Pay off the house. Medicaid can’t take that if a spouse needs long term care. It’s the only place you can shelter assets from Medicaid lookback.

With a bigger policy where you’re less likely to exhaust the benefits, it’s more about price. There are a few states where a LTC policy will stop them from zeroing out your other assets beyond a house and ~125k. If you’re in one of those states, it’s a different discussion.
Topic Author
L82GAME
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Re: Advice Requested: LTCi or Paydown Mortgage

Post by L82GAME »

Thank you, mhalley. Waiting for a few years to check back in on policy structures and costs may be warranted here.

Thank you, GeoffD, for your perspective. I'm very sorry to read about your mother. My in-laws are experiencing memory issues, and it's a difficult process for everyone.
“Simplicity is the ultimate sophistication.” - Lao Tzu
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willthrill81
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Re: Advice Requested: LTCi or Paydown Mortgage

Post by willthrill81 »

I agree that the LTCi policy is not as appealing as paying down the mortgage. Generally speaking, you don't want a mortgage in retirement because it increases your sequence of returns by forcing you to make withdrawals from your portfolio regardless of how it's performing. Plus, a guaranteed 3.75% after-tax return is very solid these days. And yes, a $150k maximum benefit isn't likely to move the needle much anyway in your situation.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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JoeRetire
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Re: Advice Requested: LTCi or Paydown Mortgage

Post by JoeRetire »

L82GAME wrote: Tue Feb 25, 2020 11:45 am -Both in-laws have dementia/ALZ. This puts my wife at higher risk.
-Coloring my view of the decision is that my in-laws have LTCi policies. Try as we might, we cannot get them qualified for benefits either because they cannot demonstrate the inability to perform 2 ADLs, or can they can't demonstrate that they require constant supervision due to being a harm to selves or others. Therefore, while continuing to pay LTCi premiums for no benefits payout, they are also paying Visiting Angels out of pocket. Maddening.
So I'm guessing the conclusion is that while it is maddening now, it's only a matter of time before their LTCi benefits will be used.
-Our odds of successfully retiring full-time into our nineties increase if our mortgage is paid off eight years early when I retire at 62.
Can you expand on how you came to that conclusion?
Do we purchase LTCi?
How old are you?
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
Topic Author
L82GAME
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Re: Advice Requested: LTCi or Paydown Mortgage

Post by L82GAME »

Thanks, JoeRetire. See my responses here:
JoeRetire wrote: Tue Feb 25, 2020 2:43 pm
L82GAME wrote: Tue Feb 25, 2020 11:45 am -Both in-laws have dementia/ALZ. This puts my wife at higher risk.
-Coloring my view of the decision is that my in-laws have LTCi policies. Try as we might, we cannot get them qualified for benefits either because they cannot demonstrate the inability to perform 2 ADLs, or can they can't demonstrate that they require constant supervision due to being a harm to selves or others. Therefore, while continuing to pay LTCi premiums for no benefits payout, they are also paying Visiting Angels out of pocket. Maddening.
So I'm guessing the conclusion is that while it is maddening now, it's only a matter of time before their LTCi benefits will be used.
Yes, fingers crossed
-Our odds of successfully retiring full-time into our nineties increase if our mortgage is paid off eight years early when I retire at 62.
Can you expand on how you came to that conclusion?
[EDIT]By While delaying SS for both my wife and myself, if we have increased cashflow from my pension and investments, as needed, due to having no mortgage payment from age 62 to 70, it lessens the need to pull down more from our tax-deferred retirement accounts that could instead continue to appreciate while reducing the sequence of returns risk
Do we purchase LTCi?
How old are you?
DW will be 55 this year, I'll be 48.
Last edited by L82GAME on Tue Feb 25, 2020 2:55 pm, edited 1 time in total.
“Simplicity is the ultimate sophistication.” - Lao Tzu
Topic Author
L82GAME
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Re: Advice Requested: LTCi or Paydown Mortgage

Post by L82GAME »

willthrill81 wrote: Tue Feb 25, 2020 2:22 pm I agree that the LTCi policy is not as appealing as paying down the mortgage. Generally speaking, you don't want a mortgage in retirement because it increases your sequence of returns by forcing you to make withdrawals from your portfolio regardless of how it's performing. Plus, a guaranteed 3.75% after-tax return is very solid these days. And yes, a $150k maximum benefit isn't likely to move the needle much anyway in your situation.
Thank you, willthrill81. The logic of your pithy post nicely captures the direction I'm leaning toward.
“Simplicity is the ultimate sophistication.” - Lao Tzu
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JoeRetire
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Re: Advice Requested: LTCi or Paydown Mortgage

Post by JoeRetire »

L82GAME wrote: Tue Feb 25, 2020 2:49 pmYes, fingers crossed
I wish you luck. My sister-in-law has been in assisted living with dementia for quite a while now.
My best friend's mom was in dementia care for years before passting.
Not fun.
By delaying SS for both my wife and myself, if we have increased cashflow from my pension and investments, as needed, due to having no mortgage payment from age 62 to 70, it lessens the need to pull down more from our tax-deferred retirement accounts that could instead continue to appreciate while reducing the sequence of returns risk
Or you could choose to do neither purchasing LTCi, nor paying down your very-low-rate mortgage.
Instead, you could invest this money per your asset allocation plan.
DW will be 55 this year, I'll be 48.
Sounds like you could choose to hold off on the decision for a while.
My financial advisor suggested that we get ours just before turning 60. That's what we did.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
Topic Author
L82GAME
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Re: Advice Requested: LTCi or Paydown Mortgage

Post by L82GAME »

JoeRetire wrote: Tue Feb 25, 2020 2:57 pm
L82GAME wrote: Tue Feb 25, 2020 2:49 pmYes, fingers crossed
I wish you luck. My sister-in-law has been in assisted living with dementia for quite a while now.
My best friend's mom was in dementia care for years before passting.
Not fun.
By delaying SS for both my wife and myself, if we have increased cashflow from my pension and investments, as needed, due to having no mortgage payment from age 62 to 70, it lessens the need to pull down more from our tax-deferred retirement accounts that could instead continue to appreciate while reducing the sequence of returns risk
Or you could choose to do neither purchasing LTCi, nor paying down your very-low-rate mortgage.
Instead, you could invest this money per your asset allocation plan.
DW will be 55 this year, I'll be 48.
Sounds like you could choose to hold off on the decision for a while.
My financial advisor suggested that we get ours just before turning 60. That's what we did.
Thanks again, JoeRetire. Setting aside my dilemma for a moment, I wish you, your SO and your sister-in-law well as you navigate the difficulties of seeing a loved one suffer from dementia.

Regarding investment options RE: "invest this money per AA plan"; my wife and I have discussed this as an option. I lean toward the guaranteed rate of return, especially in these times of extremely low interest rates, when considering paying down the mortgage early. However, the alternative point of view is that with the effect of inflation relative to a fixed rate loan of 3.75% over the next 21 years, a mortgage payment's drag on FV cash-flow may be greatly mitigated. I appreciate any further thoughts you have on the matter. Thanks again.
“Simplicity is the ultimate sophistication.” - Lao Tzu
sb0623inc
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Re: Advice Requested: LTCi or Paydown Mortgage

Post by sb0623inc »

I agree with many of the comments about not buying the LTC. I would pay off the mortgage. The money you will end up saving from only having to pay the insurance and taxes would be worth it. You could then either invest or save the $ amount saved. I would be hesitant to use equity to pay for anything, unless there was no other choice.
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L82GAME
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Re: Advice Requested: LTCi or Paydown Mortgage

Post by L82GAME »

sb0623inc wrote: Tue Feb 25, 2020 3:42 pm I agree with many of the comments about not buying the LTC. I would pay off the mortgage. The money you will end up saving from only having to pay the insurance and taxes would be worth it. You could then either invest or save the $ amount saved. I would be hesitant to use equity to pay for anything, unless there was no other choice.
Thank you. Agreed, equity would be our last keg of dry powder.
“Simplicity is the ultimate sophistication.” - Lao Tzu
TN_Boy
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Re: Advice Requested: LTCi or Paydown Mortgage

Post by TN_Boy »

L82GAME wrote: Tue Feb 25, 2020 11:45 am
snip

-Both in-laws have dementia/ALZ. This puts my wife at higher risk.
-Coloring my view of the decision is that my in-laws have LTCi policies. Try as we might, we cannot get them qualified for benefits either because they cannot demonstrate the inability to perform 2 ADLs, or can they can't demonstrate that they require constant supervision due to being a harm to selves or others. Therefore, while continuing to pay LTCi premiums for no benefits payout, they are also paying Visiting Angels out of pocket. Maddening.

snip
Are you sure that because both parents have dementia your spouse is at higher risk?

Unless they had early onset Alzheimers, I'm not sure that the risk is that much higher. Lifestyle factors (diet, exercise etc etc) probably influence her risk just as much as her genetics.

Back to the parents, when you had doctors perform cognitive tests on the parents, what results did they get?

Can the Visiting Angels not document the help they are providing for the ADLs?

This is a slight tangent to your question, but it might be helpful to others if you could (briefly) describe how you've tried to trigger the LTCi.
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JoeRetire
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Re: Advice Requested: LTCi or Paydown Mortgage

Post by JoeRetire »

L82GAME wrote: Tue Feb 25, 2020 3:08 pm Thanks again, JoeRetire. Setting aside my dilemma for a moment, I wish you, your SO and your sister-in-law well as you navigate the difficulties of seeing a loved one suffer from dementia.
Thanks.
Regarding investment options RE: "invest this money per AA plan"; my wife and I have discussed this as an option. I lean toward the guaranteed rate of return, especially in these times of extremely low interest rates, when considering paying down the mortgage early. However, the alternative point of view is that with the effect of inflation relative to a fixed rate loan of 3.75% over the next 21 years, a mortgage payment's drag on FV cash-flow may be greatly mitigated. I appreciate any further thoughts you have on the matter. Thanks again.
Do your assets invested according to your asset allocation plan typically earn more than 3.75% ?
Mine do, even in these times of extremely low interest rates.

For me, that makes the choice pretty easy.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
dandinsac
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Re: Advice Requested: LTCi or Paydown Mortgage

Post by dandinsac »

L82GAME wrote: Tue Feb 25, 2020 11:45 am Current home value is $318k. ~21 years left on mortgage. ~20% equity. Fixed rate of 3.75%
How about another option...

3) Research no cost refinancing to a 20 year mortgage. Since you have 21 years to go, you may be able to get a lower payment and interest rate which would have the mortgage paid off sooner. (I just refinanced to 20 years @ 3.25% with no out of pocket cost. I did have ~50% equity and good credit.)
Topic Author
L82GAME
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Re: Advice Requested: LTCi or Paydown Mortgage

Post by L82GAME »

dandinsac wrote: Tue Feb 25, 2020 7:45 pm
L82GAME wrote: Tue Feb 25, 2020 11:45 am Current home value is $318k. ~21 years left on mortgage. ~20% equity. Fixed rate of 3.75%
How about another option...

3) Research no cost refinancing to a 20 year mortgage. Since you have 21 years to go, you may be able to get a lower payment and interest rate which would have the mortgage paid off sooner. (I just refinanced to 20 years @ 3.25% with no out of pocket cost. I did have ~50% equity and good credit.)
Thank you, dandinsac. At 20% equity and with outstanding credit, at current rates, a lower duration refi. still doesn't make sense for us. I'd rather have the flexibility to payoff early without penalty but not be locked into a higher monthly payment for a shorter duration.
“Simplicity is the ultimate sophistication.” - Lao Tzu
Topic Author
L82GAME
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Re: Advice Requested: LTCi or Paydown Mortgage

Post by L82GAME »

JoeRetire wrote: Tue Feb 25, 2020 7:33 pm
L82GAME wrote: Tue Feb 25, 2020 3:08 pm Thanks again, JoeRetire. Setting aside my dilemma for a moment, I wish you, your SO and your sister-in-law well as you navigate the difficulties of seeing a loved one suffer from dementia.
Thanks.
Regarding investment options RE: "invest this money per AA plan"; my wife and I have discussed this as an option. I lean toward the guaranteed rate of return, especially in these times of extremely low interest rates, when considering paying down the mortgage early. However, the alternative point of view is that with the effect of inflation relative to a fixed rate loan of 3.75% over the next 21 years, a mortgage payment's drag on FV cash-flow may be greatly mitigated. I appreciate any further thoughts you have on the matter. Thanks again.
Do your assets invested according to your asset allocation plan typically earn more than 3.75% ?
Mine do, even in these times of extremely low interest rates.

For me, that makes the choice pretty easy.
Excellent food for thought. Thank you again.
“Simplicity is the ultimate sophistication.” - Lao Tzu
Topic Author
L82GAME
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Re: Advice Requested: LTCi or Paydown Mortgage

Post by L82GAME »

TN_Boy wrote: Tue Feb 25, 2020 7:18 pm
L82GAME wrote: Tue Feb 25, 2020 11:45 am
snip

-Both in-laws have dementia/ALZ. This puts my wife at higher risk.
-Coloring my view of the decision is that my in-laws have LTCi policies. Try as we might, we cannot get them qualified for benefits either because they cannot demonstrate the inability to perform 2 ADLs, or can they can't demonstrate that they require constant supervision due to being a harm to selves or others. Therefore, while continuing to pay LTCi premiums for no benefits payout, they are also paying Visiting Angels out of pocket. Maddening.

snip
Are you sure that because both parents have dementia your spouse is at higher risk? Via genetic testing, she is at risk of ALZ. Your point is well taken, nonetheless. I don't know empirically if these circumstances put her at any higher risk relative to a similar cohort.

Unless they had early onset Alzheimers, No, they did not. I'm not sure that the risk is that much higher. Lifestyle factors (diet, exercise etc etc) probably influence her risk just as much as her genetics. Agreed. My wife is taking this seriously and has hired a personal trainer and recently completed a monitored weight loss program. She's doing a great job!

Back to the parents, when you had doctors perform cognitive tests on the parents, what results did they get? As of their annual evaluation last Sept., they were diagnosed with "mild" dementia. However, they cannot track conversations and cannot remember to take their meds. Hence, Visiting Angels.

Can the Visiting Angels not document the help they are providing for the ADLs? Yes, they are doing that. My wife is working closely with Visiting Angels to do so as to have ample ammunition for doing battle with the LTCi carrier

This is a slight tangent to your question, but it might be helpful to others if you could (briefly) describe how you've tried to trigger the LTCi.
This is a good sub-thread. Please see my responses above. If I need to correct any statements after conferring with my DW, I'll subsequently show the edits.
“Simplicity is the ultimate sophistication.” - Lao Tzu
dandinsac
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Re: Advice Requested: LTCi or Paydown Mortgage

Post by dandinsac »

L82GAME wrote: Tue Feb 25, 2020 7:48 pm
dandinsac wrote: Tue Feb 25, 2020 7:45 pm
L82GAME wrote: Tue Feb 25, 2020 11:45 am Current home value is $318k. ~21 years left on mortgage. ~20% equity. Fixed rate of 3.75%
How about another option...

3) Research no cost refinancing to a 20 year mortgage. Since you have 21 years to go, you may be able to get a lower payment and interest rate which would have the mortgage paid off sooner. (I just refinanced to 20 years @ 3.25% with no out of pocket cost. I did have ~50% equity and good credit.)
Thank you, dandinsac. At 20% equity and with outstanding credit, at current rates, a lower duration refi. still doesn't make sense for us. I'd rather have the flexibility to payoff early without penalty but not be locked into a higher monthly payment for a shorter duration.
I was thinking the same way as you with my mortgage when I compared it with a 15-year refinance. I saw a thread on LenderFi and realized they had a no cost 20 year option. I had 22.5 years left on my 30 year mortgage. My monthly payment went up about 3.5% with no prepayment restrictions. Since you only have 21 years left, your payment should be very close. It’s worth the 5 minutes to check.
TN_Boy
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Re: Advice Requested: LTCi or Paydown Mortgage

Post by TN_Boy »

L82GAME wrote: Tue Feb 25, 2020 8:01 pm
TN_Boy wrote: Tue Feb 25, 2020 7:18 pm
L82GAME wrote: Tue Feb 25, 2020 11:45 am
snip

-Both in-laws have dementia/ALZ. This puts my wife at higher risk.
-Coloring my view of the decision is that my in-laws have LTCi policies. Try as we might, we cannot get them qualified for benefits either because they cannot demonstrate the inability to perform 2 ADLs, or can they can't demonstrate that they require constant supervision due to being a harm to selves or others. Therefore, while continuing to pay LTCi premiums for no benefits payout, they are also paying Visiting Angels out of pocket. Maddening.

snip
Are you sure that because both parents have dementia your spouse is at higher risk? Via genetic testing, she is at risk of ALZ. Your point is well taken, nonetheless. I don't know empirically if these circumstances put her at any higher risk relative to a similar cohort.

Unless they had early onset Alzheimers, No, they did not. I'm not sure that the risk is that much higher. Lifestyle factors (diet, exercise etc etc) probably influence her risk just as much as her genetics. Agreed. My wife is taking this seriously and has hired a personal trainer and recently completed a monitored weight loss program. She's doing a great job!

Back to the parents, when you had doctors perform cognitive tests on the parents, what results did they get? As of their annual evaluation last Sept., they were diagnosed with "mild" dementia. However, they cannot track conversations and cannot remember to take their meds. Hence, Visiting Angels.

Can the Visiting Angels not document the help they are providing for the ADLs? Yes, they are doing that. My wife is working closely with Visiting Angels to do so as to have ample ammunition for doing battle with the LTCi carrier

This is a slight tangent to your question, but it might be helpful to others if you could (briefly) describe how you've tried to trigger the LTCi.
This is a good sub-thread. Please see my responses above. If I need to correct any statements after conferring with my DW, I'll subsequently show the edits.
How was the diagnosis of mild dementia made? For example, something like the MoCA test, or MMSE? I have a relative that will do well on the more basic screening tests, but give this person a somewhat more extensive test (like MoCA, which is not super detailed, but deeper than the basic screening tests) and the deficits show up clearly.

The LTCi company is reasonable in asking for good documentation on the problems. Facilities are often pretty good about working with the insurers, but since the parents are not yet in a facility they don't have that support.

I think a lot of people may not realize that seniors can decline to a point where they can mostly manage the ADLs, and even still drive a bit, shop, etc, but are in no ways independent. And that level does not qualify them for LTCi claims (though often they will continue to decline and qualify).
Plano
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Re: Advice Requested: LTCi or Paydown Mortgage

Post by Plano »

TN_Boy wrote: Tue Feb 25, 2020 7:18 pm
L82GAME wrote: Tue Feb 25, 2020 11:45 am
snip

Back to the parents, when you had doctors perform cognitive tests on the parents, what results did they get? As of their annual evaluation last Sept., they were diagnosed with "mild" dementia. However, they cannot track conversations and cannot remember to take their meds. Hence, Visiting Angels.

Can the Visiting Angels not document the help they are providing for the ADLs? Yes, they are doing that. My wife is working closely with Visiting Angels to do so as to have ample ammunition for doing battle with the LTCi carrier

This is a slight tangent to your question, but it might be helpful to others if you could (briefly) describe how you've tried to trigger the LTCi.
This is a good sub-thread. Please see my responses above. If I need to correct any statements after conferring with my DW, I'll subsequently show the edits.
Insert disclaimer re: not providing legal advice. Do you have their whole policy? If not, request it. Most of these policies state benefits are payable if the insured is a Chronically Ill Individual as defined in I.R.C. § 7702B(c)(2), which means either:
- unable to perform without substantial assistance from another individual at least 2 ADLs, or
- "requiring substantial supervision to protect such individual from threats to health and safety due to severe cognitive impairment."
If this one does, look at how the policy defines "severe cognitive impairment." Many individual LTC policies have different criteria for SCI when caused by Alzheimer's, Parkinson's, or any brain disorder with demonstrable organic cause. Also look at how the policy defines "substantial supervision." If there is a physical component to their disability, look at how the policy defines "substantial assistance" with respect to ADLs. Most policies do not require hands-on help; the need for stand-by assistance is enough.

It can be difficult to wade through a policy, so let me share a hack: scan the entire policy including all riders, then OCR the pdf file or convert it to a Word doc, then Ctrl+F to find the terms you need (like Alzheimer's). Or just consult a lawyer experienced in LTC matters. I'm very sorry to hear about your in-laws, but I am glad they have you looking out for them.
Topic Author
L82GAME
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Re: Advice Requested: LTCi or Paydown Mortgage

Post by L82GAME »

Plano wrote: Tue Feb 25, 2020 9:09 pm
TN_Boy wrote: Tue Feb 25, 2020 7:18 pm
L82GAME wrote: Tue Feb 25, 2020 11:45 am
snip

Back to the parents, when you had doctors perform cognitive tests on the parents, what results did they get? As of their annual evaluation last Sept., they were diagnosed with "mild" dementia. However, they cannot track conversations and cannot remember to take their meds. Hence, Visiting Angels.

Can the Visiting Angels not document the help they are providing for the ADLs? Yes, they are doing that. My wife is working closely with Visiting Angels to do so as to have ample ammunition for doing battle with the LTCi carrier

This is a slight tangent to your question, but it might be helpful to others if you could (briefly) describe how you've tried to trigger the LTCi.
This is a good sub-thread. Please see my responses above. If I need to correct any statements after conferring with my DW, I'll subsequently show the edits.
Insert disclaimer re: not providing legal advice. Do you have their whole policy? If not, request it. Most of these policies state benefits are payable if the insured is a Chronically Ill Individual as defined in I.R.C. § 7702B(c)(2), which means either:
- unable to perform without substantial assistance from another individual at least 2 ADLs, or
- "requiring substantial supervision to protect such individual from threats to health and safety due to severe cognitive impairment."
If this one does, look at how the policy defines "severe cognitive impairment." Many individual LTC policies have different criteria for SCI when caused by Alzheimer's, Parkinson's, or any brain disorder with demonstrable organic cause. Also look at how the policy defines "substantial supervision." If there is a physical component to their disability, look at how the policy defines "substantial assistance" with respect to ADLs. Most policies do not require hands-on help; the need for stand-by assistance is enough.

It can be difficult to wade through a policy, so let me share a hack: scan the entire policy including all riders, then OCR the pdf file or convert it to a Word doc, then Ctrl+F to find the terms you need (like Alzheimer's). Or just consult a lawyer experienced in LTC matters. I'm very sorry to hear about your in-laws, but I am glad they have you looking out for them.
Thank you, Plano. We have read the policies in their entirety, and they are sufficiently vague to suit the Carrier's interests. I will review the policies again, but what I recall is that the "trigger" for cognitive-related qualification of services is the need for "continual supervision". Nowhere in the policy is "continual supervision" defined. However, any qualifying condition, be it via ADLs or cognitive decline, must be certified by a medical professional, and "medical professional" is defined in the policy. Therefore, my wife and I attempted to work through their cognition provider to certify them as incapacitated due to dementia. The MoCA exam results did not indicate such a level of decline.
“Simplicity is the ultimate sophistication.” - Lao Tzu
TN_Boy
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Re: Advice Requested: LTCi or Paydown Mortgage

Post by TN_Boy »

L82GAME wrote: Tue Feb 25, 2020 9:42 pm
Plano wrote: Tue Feb 25, 2020 9:09 pm
TN_Boy wrote: Tue Feb 25, 2020 7:18 pm
L82GAME wrote: Tue Feb 25, 2020 11:45 am
snip

Back to the parents, when you had doctors perform cognitive tests on the parents, what results did they get? As of their annual evaluation last Sept., they were diagnosed with "mild" dementia. However, they cannot track conversations and cannot remember to take their meds. Hence, Visiting Angels.

Can the Visiting Angels not document the help they are providing for the ADLs? Yes, they are doing that. My wife is working closely with Visiting Angels to do so as to have ample ammunition for doing battle with the LTCi carrier

This is a slight tangent to your question, but it might be helpful to others if you could (briefly) describe how you've tried to trigger the LTCi.
This is a good sub-thread. Please see my responses above. If I need to correct any statements after conferring with my DW, I'll subsequently show the edits.
Insert disclaimer re: not providing legal advice. Do you have their whole policy? If not, request it. Most of these policies state benefits are payable if the insured is a Chronically Ill Individual as defined in I.R.C. § 7702B(c)(2), which means either:
- unable to perform without substantial assistance from another individual at least 2 ADLs, or
- "requiring substantial supervision to protect such individual from threats to health and safety due to severe cognitive impairment."
If this one does, look at how the policy defines "severe cognitive impairment." Many individual LTC policies have different criteria for SCI when caused by Alzheimer's, Parkinson's, or any brain disorder with demonstrable organic cause. Also look at how the policy defines "substantial supervision." If there is a physical component to their disability, look at how the policy defines "substantial assistance" with respect to ADLs. Most policies do not require hands-on help; the need for stand-by assistance is enough.

It can be difficult to wade through a policy, so let me share a hack: scan the entire policy including all riders, then OCR the pdf file or convert it to a Word doc, then Ctrl+F to find the terms you need (like Alzheimer's). Or just consult a lawyer experienced in LTC matters. I'm very sorry to hear about your in-laws, but I am glad they have you looking out for them.
Thank you, Plano. We have read the policies in their entirety, and they are sufficiently vague to suit the Carrier's interests. I will review the policies again, but what I recall is that the "trigger" for cognitive-related qualification of services is the need for "continual supervision". Nowhere in the policy is "continual supervision" defined. However, any qualifying condition, be it via ADLs or cognitive decline, must be certified by a medical professional, and "medical professional" is defined in the policy. Therefore, my wife and I attempted to work through their cognition provider to certify them as incapacitated due to dementia. The MoCA exam results did not indicate such a level of decline.
Thanks for the update. Yes, continuous supervision is a high bar. I think you are in the position I alluded to in my last post -- the parents almost certainly cannot live without help, but may not yet qualify for the insurance. However, if they really need daily help with the ADLs, I'd *think* that proper documentation from the home health organization would push the claim to success.

Oh and original question -- I'd pay down the mortgage, but that's partly because I wouldn't get LTCi at your age(s). Since I wouldn't buy the policies at your age, it would be an easy decision for me. You could re-evaluate as you get to 60 or thereabouts.
Topic Author
L82GAME
Posts: 445
Joined: Sat Dec 07, 2019 9:29 am

Re: Advice Requested: LTCi or Paydown Mortgage

Post by L82GAME »

Thank you, all. Here's what we've decided which results in an approach that takes all of your advice into consideration:

LTCi for us
  • We will hold off on purchasing LTCi for now
  • We are both still young enough to wait a few years and reexamine the industry and its offerings at that time
  • We will not pay additional principal only payments toward our mortgage at this time
  • However, what I initiated effective this morning is to max-out my employee-pre tax contributions to my 457
    • Doing so increases our HH pre-tax savings rate to 21%
    • When I separate from government service, we can make withdrawals penalty free and pay only income tax
    • This allows our money to appreciate per our overall portfolio AA over the next 14 years
    • If I'm fortunate enough to succeed in my plan and retire at 62, we can choose at that time from what bucket (e.g., taxable investments, cash savings, 457) we would payoff our mortgage eight years early if it makes sense to do so given our circumstances at that time
LTC for In-laws
  • We welcome any continued conversation folks wish to have about LTC relative to my in-laws, or relative to those for whom you care
  • My wife continues to work diligently with my in-laws' Dr. and Visiting Angels to eventually claim LTCi benefits
“Simplicity is the ultimate sophistication.” - Lao Tzu
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