Long-Term Care Decision

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pintail07
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Re: Long-Term Care Decision

Post by pintail07 » Sun Aug 11, 2019 1:44 pm

willthrill81 wrote:
Sun Aug 11, 2019 1:23 pm
pintail07 wrote:
Sun Aug 11, 2019 1:03 pm
If the claim lasts longer than a few months it patently true.
According to Genworth, the longest coverage period they will offer to people in our state (WA) is 5 years. Multiplied by the maximum daily maximum benefit of $300, that's $547,500 per person of maximum coverage. That would not at all be a financial catastrophe for a "very wealthy" couple.

Are you saying that Genworth is losing money by selling such LTC policies? If so, how can they do so and not go bankrupt?

Further, a LTC policy for an opposite sex couple aged 65 in our state with a $300 daily maximum benefit (necessary since nursing homes are roughly $100k annually) with a 5 year maximum coverage period, the longest they will provide at least in our state, would cost $4,553.31 annually, ~$9,100 annually for the couple. That means that two years' premiums are payment for approximately one month of LTC in a nursing home, about the most expensive form of LTC, in our area for each spouse. Considering that, according to the Long-term Care Insurance Association, the 70% of the initial LTC insurance claims don't occur until the insured is at least age 81, assuming the premiums don't increase at all for the next 16 years, which is not historically a good assumption, both spouses would need to receive about 8 months of LTC at age 81 in order to break-even. If they spend more and/or use LTC prior, they come out ahead. Otherwise, they don't.
Assume one buys a policy at age 60. Three year benefit of 300 per day with 3% compound inflation for 2500 per year. Assume they go on claim at age 83, premiums paid in of 57,500, not including rate increases. At 83 daily benefit is 600, monthly benefit of 18,000. How many months before they recoup their premiums?

TN_Boy
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Re: Long-Term Care Decision

Post by TN_Boy » Sun Aug 11, 2019 1:44 pm

willthrill81 wrote:
Sun Aug 11, 2019 1:25 pm
TN_Boy wrote:
Sun Aug 11, 2019 1:15 pm
willthrill81 wrote:
Sun Aug 11, 2019 12:59 pm
pintail07 wrote:
Sun Aug 11, 2019 12:25 pm
Without a doubt self insuring is the most economical way until one goes on claim. After just a few months on claim one reclaims all premiums. The very wealthy grasp this concept.
You seem to be suggesting that LTC insurance is guaranteed to 'win' if you make a claim. That's demonstrably false.
You are feeding the trolls .....
Possibly, but it's important for lurkers to understand why the claim is false. The short answer is that if LTC insurance was a good 'investment', the insurance companies providing it would go bankrupt. It's true that if one could write off the premiums as a business expense and take an effective 35% discount on the premiums that it could be a good deal, but I believe that there are limits on how much can be written off this way.
Yeah, I just get fed up with the "The very wealthy grasp this concept" type of remarks. Like only rich people get it.

Your analysis was excellent.

pintail07
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Re: Long-Term Care Decision

Post by pintail07 » Sun Aug 11, 2019 1:46 pm

So sorry I offended you.

stan1
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Re: Long-Term Care Decision

Post by stan1 » Sun Aug 11, 2019 2:01 pm

TN_Boy wrote:
Sun Aug 11, 2019 1:44 pm

Yeah, I just get fed up with the "The very wealthy grasp this concept" type of remarks. Like only rich people get it.
I think other people grasp it all too well but you have to be pretty well off to be able to afford the premiums to begin with. I don't have the data but I'd fully expect people who have sizable pensions generating income in retirement to be outsize purchasers of LTCI over people who just have Social Security. Most people are left with the fallbacks to private care nursing home: self care, generosity of family and friends, and eventually Medicaid. We may not like it but private pay assisted living and nursing home care through LTCI, CCRC or pay as you go are luxury purchases many cannot afford. Thus we are left with people weighing this decision who seem to be able to afford either LTCI or self funding.

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TomatoTomahto
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Re: Long-Term Care Decision

Post by TomatoTomahto » Sun Aug 11, 2019 2:27 pm

stan1 wrote:
Sun Aug 11, 2019 2:01 pm
TN_Boy wrote:
Sun Aug 11, 2019 1:44 pm
Yeah, I just get fed up with the "The very wealthy grasp this concept" type of remarks. Like only rich people get it.
I think other people grasp it all too well but you have to be pretty well off to be able to afford the premiums to begin with. I don't have the data but I'd fully expect people who have sizable pensions generating income in retirement to be outsize purchasers of LTCI over people who just have Social Security. Most people are left with the fallbacks to private care nursing home: self care, generosity of family and friends, and eventually Medicaid. We may not like it but private pay assisted living and nursing home care through LTCI, CCRC or pay as you go are luxury purchases many cannot afford. Thus we are left with people weighing this decision who seem to be able to afford either LTCI or self funding.
Admittedly a 7 year old analysis, but ...
https://www.consumerreports.org/cro/2012/08/long-term-care-insurance/index.htm wrote:Ken Weingarten, a fee-only financial planner in Lawrenceville, N.J., says in his state retired couples who have $2.5 million or more in liquid assets can generally afford to pay for long-term care out-of-pocket, while those with less than $500,000 will probably be unable to afford the premiums on an LTC policy. "It's the people in between who are the most likely candidates for a long-term-care policy," he says. Those numbers will be lower in states where care is less expensive. To find state-by-state costs, check Genworth Financial's 2012 Cost of Care survey, at genworth.com.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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willthrill81
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Re: Long-Term Care Decision

Post by willthrill81 » Sun Aug 11, 2019 2:44 pm

stan1 wrote:
Sun Aug 11, 2019 2:01 pm
TN_Boy wrote:
Sun Aug 11, 2019 1:44 pm

Yeah, I just get fed up with the "The very wealthy grasp this concept" type of remarks. Like only rich people get it.
I think other people grasp it all too well but you have to be pretty well off to be able to afford the premiums to begin with. I don't have the data but I'd fully expect people who have sizable pensions generating income in retirement to be outsize purchasers of LTCI over people who just have Social Security. Most people are left with the fallbacks to private care nursing home: self care, generosity of family and friends, and eventually Medicaid. We may not like it but private pay assisted living and nursing home care through LTCI, CCRC or pay as you go are luxury purchases many cannot afford. Thus we are left with people weighing this decision who seem to be able to afford either LTCI or self funding.
Yes. One of the big proponents of LTCi around here has commented about a family member eating gourmet food and drinking mimosas at their LTC facility and paying for it via LTCi. If that's what a well-informed person/family wants to do, that's fine, but let's not kid ourselves that this type of insurance isn't primarily a luxury purchase for those who are pretty well-off financially in comparison to the general population.
“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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LadyGeek
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Re: Long-Term Care Decision

Post by LadyGeek » Sun Aug 11, 2019 2:46 pm

Colormeado - Has your question been answered?
Colormeado wrote:
Sun Jul 28, 2019 7:40 am
My wife and I are looking to purchase Long-Term Care insurance and would appreciate your thoughts on whether you think this policy is a good choice. At this point, we don’t think that we have enough to self-insure. Thanks for any advice. Here are some details:

Shared Benefits. $360,000 Policy Maximum (one spouse may use up to $300,000).
Covers nursing home, assisted living and home health up to $5,000 Monthly Maximum.
3% compound inflation on policy maximum and monthly maximum for 20 years.
Premiums waived for spouse on claim. If one spouse dies, their premium ends.
Cost: = Him (age 60) = $1,519; Her (age 57) = $2,064; Total $3,584.
Company: Mutual of Omaha.
Net worth about $1 million (which are mostly in retirement accounts and house worth $150,000).
Combined Expected pensions at retirement in 4 or 5 years: $70,000. If one spouse dies, it will go back to $45,000 for the surviving spouse. COLAs only around 1.5%.
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cautious
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Re: Long-Term Care Decision

Post by cautious » Sun Aug 11, 2019 3:38 pm

Colormeado wrote:
Tue Jul 30, 2019 7:09 pm
willthrill81 wrote:
Sun Jul 28, 2019 8:50 pm
bsteiner wrote:
Sun Jul 28, 2019 9:48 am
There's not much insurance in it. If you didn't buy the insurance, the $5,000 a year would probably grow to about $200,000 in 30 years. The risk isn't that you'll need $300,000 worth of care when you're in your late 80s or 90s. The risk is that something happens for which you'll need care for 10 or 20 years. A better policy would be one where you paid the first 3 years, or the first $300,000, and the insurance company paid everything after that.
My thoughts are similar.

A nursing home runs about $100k annually in our area. If the cost for the OP is similar, that means they would still be out of pocket $40k annually. At least it's unlikely that they'll need more than the combined 6 years of care funded at that level.

The OP is, IMHO, is probably able to self-insure LTC. If either spouse could live on the survivor's benefit of $45k plus half of their portfolio (e.g. assuming that up to half of their portfolio potentially went to fund LTC, which is very unlikely), then self-insuring is probably best.

At a 4% return, $3,584 invested annually for 20 years would be worth $106k; according to the American Association for Long-term Care Insurance, 70% of LTC insurance claims are first filed when the insured is at least 80 years old, so the OP investing the premiums until at least age 80 seems like a reasonable time frame. That's a pretty sizable amount to give up in return for $360k worth of protection.
Do others think it is reasonable for us to consider self-insuring for long-term care? We each have 4-5 more years of work, so we could get to an asset level of $1.2 million with no debt. If you do not feel that is adequate, how much more do you think is required? More importantly what level of liquid assets do you think is required? Since we each will have pensions, if the right options are chosen, the surviving spouse could have closer to $55,000 per year. The COLAs are very low however.
You may also look into CCRCs as you think about future needs. I live in one in Seattle. I entered as a resident in Independent Living (IL) 10 years ago with less assets than you have listed. I chose this route because once they accepted me, by law I cannot be asked to leave for lack of funds. That eliminated the LTC insurance issues. As a retired health care professional I knew of problems people encountered with getting services paid for, at a time they didn't need a hassle. So here are my basics as an example.

I bought in at $200,000K. (There is a choice of contract, with some refundable.) The fee for my one bedroom apt (incl. parking, Dining Room allowance, all utilities, some salon services, WI-Fi etc.) is $2500 month. Supported Living (SL) is $7-10,000 mo. with round the clock staff. Many residents prefer to stay in IL and pay private caregivers for assistance with personal care, shopping, cooking etc. as needed. It works well for me and I have set up my apt to allow me to do that, and plan to even in hospice care if necessary.

But more relevant to your situation is how couples use the facilities. When one needs more care, some hire personal caregivers part or full time, but in some cases, the care is best provided in SL or Dementia Care. In the latter situation, fees are adjusted. The major benefit is that either spouse is not isolated from the larger community and all the social contact and activities at a time of major emotional stress. Children appreciate that their parents are in a situation that will respond to their health care needs, and they can enjoy social contact with them in secure settings. Also, If one passes, the other is now in an established support community. Many residents moved in here because they appreciated their parents thoughtfulness in planning for the future and relieved them of that responsibility, They want to offer that to their children. Others move here from out of state for the same reason - but also to socialize with the grandkids. Many residents are in their 90's with a few in the 100s. I'm 85, was facing declining health years ago and opted for what is to me a no-brainer now.

You are getting thoughtful advice about LT Insurance - and it may be the best choice for you. I also second the need for an elder lawyer.
I just wanted to offer another perspective.

cognovimus
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Re: Long-Term Care Decision

Post by cognovimus » Sun Aug 11, 2019 3:58 pm

I've also been pondering the LTC decision, and the more I read here, the more befuddling it seems. I appreciate the personal anecdotes and the stats here, but I'm still far from a decision. And this is from someone who is usually fairly decisive.

I've looked at

--traditional LTC
--traditional LTC with shared care option
--hybrid single pay
--hybrid ten pay
--hybrid 20 pay
--hybrid forever pay
--all of the above with/without various inflation protection
--self-pay (for us, this would mean "setting" aside or investing very conservatively, $ XXX,XXX of our investment savings and calling it the LTC fund, so we'd reduce our other expenses accordingly)

I've asked a lot of questions, and I feel like the LTC agent answers them, but fails to tell me what I should have asked. She keeps giving me quotes for policies that wouldn't cover the current cost of SNFs in my HCOL area, possibly because there is no way we're going to pay more than $6000-7000 a year for LTC insurance.

Like others, I don't know if we'll ever use it. In a way, we'd like to just pick one and mentally put the issue to bed. And I'm not sure it's a decision we'll make purely on number crunching. We were also among those whose house insurance paid off big time (lightning strike), and had car insurance pay off when both our children totalled cars in their twenties. So I'm coming at this as a person whose has personally benefitted from insurance. We're in our early 60's and very close to retirement, so time is ticking too. If we buy, I'd like to do it soon before our next birthdays.

My parents gave up their policies after years of price increases, and my dad promptly got very ill. Didn't matter, because LTC care would have killed him, and my mother's care kept him alive, comfortable, and as happy as possible for about 15 months. My mother, in the throes of her husband's medical crisis, got her policy reinstated. Not sure if that was a prudent decision financially but it has given her a lot of peace of mind, especially knowing she is the surviving spouse.

I guess my "question" is what decision process others have used in deciding to purchase LTC and how you decided which type of policy to buy.

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willthrill81
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Re: Long-Term Care Decision

Post by willthrill81 » Sun Aug 11, 2019 4:01 pm

cautious wrote:
Sun Aug 11, 2019 3:38 pm
You may also look into CCRCs as you think about future needs. I live in one in Seattle. I entered as a resident in Independent Living (IL) 10 years ago with less assets than you have listed. I chose this route because once they accepted me, by law I cannot be asked to leave for lack of funds. That eliminated the LTC insurance issues. As a retired health care professional I knew of problems people encountered with getting services paid for, at a time they didn't need a hassle. So here are my basics as an example.

I bought in at $200,000K. (There is a choice of contract, with some refundable.) The fee for my one bedroom apt (incl. parking, Dining Room allowance, all utilities, some salon services, WI-Fi etc.) is $2500 month. Supported Living (SL) is $7-10,000 mo. with round the clock staff. Many residents prefer to stay in IL and pay private caregivers for assistance with personal care, shopping, cooking etc. as needed. It works well for me and I have set up my apt to allow me to do that, and plan to even in hospice care if necessary.

But more relevant to your situation is how couples use the facilities. When one needs more care, some hire personal caregivers part or full time, but in some cases, the care is best provided in SL or Dementia Care. In the latter situation, fees are adjusted. The major benefit is that either spouse is not isolated from the larger community and all the social contact and activities at a time of major emotional stress. Children appreciate that their parents are in a situation that will respond to their health care needs, and they can enjoy social contact with them in secure settings. Also, If one passes, the other is now in an established support community. Many residents moved in here because they appreciated their parents thoughtfulness in planning for the future and relieved them of that responsibility, They want to offer that to their children. Others move here from out of state for the same reason - but also to socialize with the grandkids. Many residents are in their 90's with a few in the 100s. I'm 85, was facing declining health years ago and opted for what is to me a no-brainer now.

You are getting thoughtful advice about LT Insurance - and it may be the best choice for you. I also second the need for an elder lawyer.
I just wanted to offer another perspective.
Thank you for providing such detailed information about your experience and current situation.

We are examining the possibility of something like a 55+ apartment community or CCRC for a family member right now, but I don't think that this person could quite pay for either the CCRC upfront fee or the monthly fee. We have found an IL facility that is top-notch and very close by, but it would be a real stretch for this person to pay for it; family would very likely to need assist financially, and I'm not sure how much many would be able and/or willing to.
Last edited by willthrill81 on Sun Aug 11, 2019 4:25 pm, edited 1 time in total.
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willthrill81
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Re: Long-Term Care Decision

Post by willthrill81 » Sun Aug 11, 2019 4:04 pm

cognovimus wrote:
Sun Aug 11, 2019 3:58 pm
I guess my "question" is what decision process others have used in deciding to purchase LTC and how you decided which type of policy to buy.
You didn't mention this, but I really think that the two big questions revolving around LTC insurance are (1) how much do you have in terms of assets that you wish to protect and (2) are facilities that will accept Medicaid and/or those that will start as private pay but transition to Medicaid in your area acceptable and reasonably available.

The CCRC model discussed above intrigues me.
“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

TN_Boy
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Re: Long-Term Care Decision

Post by TN_Boy » Sun Aug 11, 2019 4:06 pm

TomatoTomahto wrote:
Sun Aug 11, 2019 2:27 pm
stan1 wrote:
Sun Aug 11, 2019 2:01 pm
TN_Boy wrote:
Sun Aug 11, 2019 1:44 pm
Yeah, I just get fed up with the "The very wealthy grasp this concept" type of remarks. Like only rich people get it.
I think other people grasp it all too well but you have to be pretty well off to be able to afford the premiums to begin with. I don't have the data but I'd fully expect people who have sizable pensions generating income in retirement to be outsize purchasers of LTCI over people who just have Social Security. Most people are left with the fallbacks to private care nursing home: self care, generosity of family and friends, and eventually Medicaid. We may not like it but private pay assisted living and nursing home care through LTCI, CCRC or pay as you go are luxury purchases many cannot afford. Thus we are left with people weighing this decision who seem to be able to afford either LTCI or self funding.
Admittedly a 7 year old analysis, but ...
https://www.consumerreports.org/cro/2012/08/long-term-care-insurance/index.htm wrote:Ken Weingarten, a fee-only financial planner in Lawrenceville, N.J., says in his state retired couples who have $2.5 million or more in liquid assets can generally afford to pay for long-term care out-of-pocket, while those with less than $500,000 will probably be unable to afford the premiums on an LTC policy. "It's the people in between who are the most likely candidates for a long-term-care policy," he says. Those numbers will be lower in states where care is less expensive. To find state-by-state costs, check Genworth Financial's 2012 Cost of Care survey, at genworth.com.
Yes, and the OP fell squarely into the CR study as potential candidates. But I don't think we ever gave the OP a good answer. Though that is partly because we didn't have all the necessary facts, I feel.

OP said they had 70k in pension income and over a million in assets (at expected retirement). But we don't know what the living expenses are likely to be (will they spend out of the the portfolio, or is the 70k enough) plus I wondered whether they could/should change the pension survivor benefits to get less as a couple, but more than 45k for the surviving spouse.

And the finally, this is such a hard problem, due to the lack of data. At the time you need to get LTC insurance, you really have no idea whether or not you'll spend 20 years of 4k to 9k (in one of willthrill's examples) per year and then not use a penny of that insurance.

To amuse myself, I should put together a spreadsheet showing cost of LTC insurance (X dollars per year, starting at say age 60 and assuming a modest real return) plus one for LTC costs, first yearly costs (adjusted for likely inflation 20 years out), and then some kind of a matrix showing you have X% chance of needing Y years of assisting living (and the same for skilled nursing, etc).

I know the median stay in assisted living is something like 18 to 24 months, but to get an expected value for different stay lengths you have to find out the chance of 1 year, 2 years, etc.

And finally just how much insurance are you looking for? Trying to cover 10 years of skilled nursing, or 5 years of assisted living.

TN_Boy
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Re: Long-Term Care Decision

Post by TN_Boy » Sun Aug 11, 2019 4:10 pm

willthrill81 wrote:
Sun Aug 11, 2019 4:04 pm
cognovimus wrote:
Sun Aug 11, 2019 3:58 pm
I guess my "question" is what decision process others have used in deciding to purchase LTC and how you decided which type of policy to buy.
You didn't mention this, but I really think that the two big questions revolving around LTC insurance are (1) how much do you have in terms of assets that you wish to protect and (2) are facilities that will accept Medicaid and/or those that will start as private pay but transition to Medicaid in your area acceptable and reasonably available.

The CCRC model discussed above intrigues me.
We know people in CCRCs, have been in a couple, and will be looking at them. The biggest concern I have -- other than the upfront cost -- is that if I buy in at say age 70, and need assisted living at age 80, then 10 years have gone by between the time I committed to that facility and I need the extra services (and you will probably have to move into different housing on the same campus). A lot can go wrong in 10 years, such as a complete turnover of the management staff running the assisted living. I'm not sure anybody else shares that concern :happy but I worry about that time lag.

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willthrill81
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Re: Long-Term Care Decision

Post by willthrill81 » Sun Aug 11, 2019 4:18 pm

TN_Boy wrote:
Sun Aug 11, 2019 4:10 pm
willthrill81 wrote:
Sun Aug 11, 2019 4:04 pm
cognovimus wrote:
Sun Aug 11, 2019 3:58 pm
I guess my "question" is what decision process others have used in deciding to purchase LTC and how you decided which type of policy to buy.
You didn't mention this, but I really think that the two big questions revolving around LTC insurance are (1) how much do you have in terms of assets that you wish to protect and (2) are facilities that will accept Medicaid and/or those that will start as private pay but transition to Medicaid in your area acceptable and reasonably available.

The CCRC model discussed above intrigues me.
We know people in CCRCs, have been in a couple, and will be looking at them. The biggest concern I have -- other than the upfront cost -- is that if I buy in at say age 70, and need assisted living at age 80, then 10 years have gone by between the time I committed to that facility and I need the extra services (and you will probably have to move into different housing on the same campus). A lot can go wrong in 10 years, such as a complete turnover of the management staff running the assisted living. I'm not sure anybody else shares that concern :happy but I worry about that time lag.
Yes, that's a valid concern and why I am intrigued by cautious's reference to a potentially partially refundable entrance fee. Another is one mentioned at a CCRC info site.
Because it costs so much to run CCRCs and consequently, to live in one, it's important to know the financial health of the company. In order to survive, these communities must operate at or near full capacity. If they don't, then some resident services may be cut. Start by asking for the facility's audited financial statements. Here are some things to look for:
- Consider the facility's cash-to-debt ratio. This should be about 35%.
- What is the facility's cash on hand? CCRCs with “one campus average 306 days of cash on hand; those with multiple sites average 281,” according to an AARP article.
- “Watch out for facilities that rely heavily on investment income, donations or entry fees, which may signal an inability to run on income from operations,” says an article in the Wall Street Journal."
https://www.seniorliving.org/continuing ... mmunities/

For those with a modest portfolio and a home owned outright, it seems that selling the home and using the proceeds to buy into a CCRC before a real LTC event ever occurs might be a good option for some. Many couples receive enough SS benefits to cover the ongoing monthly expense easily. "Ageing in place" sounds great to me.
“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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Re: Long-Term Care Decision

Post by LadyGeek » Sun Aug 11, 2019 4:26 pm

TN_Boy wrote:
Sun Aug 11, 2019 4:10 pm
...We know people in CCRCs, have been in a couple, and will be looking at them. The biggest concern I have -- other than the upfront cost -- is that if I buy in at say age 70, and need assisted living at age 80, then 10 years have gone by between the time I committed to that facility and I need the extra services (and you will probably have to move into different housing on the same campus). A lot can go wrong in 10 years, such as a complete turnover of the management staff running the assisted living. I'm not sure anybody else shares that concern :happy but I worry about that time lag.
That actually happened with some elderly family members in a CCRC. After living there 7 years, the owners sold the place to someone else.

The residents rebelled, but the new owners ended up dumping in a bunch of money to improve the place. It had been going downhill for several years because the old owners would never put money into maintenance. Occupancy rate went down.

So, new owners, new and substantial improvements to the facility (renovations), new services, happy residents.

BTW, occupancy rate is your best indicator of determining quality. If the occupancy rate is low, there's a reason.
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delamer
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Re: Long-Term Care Decision

Post by delamer » Sun Aug 11, 2019 4:30 pm

willthrill81 wrote:
Sun Aug 11, 2019 4:04 pm
cognovimus wrote:
Sun Aug 11, 2019 3:58 pm
I guess my "question" is what decision process others have used in deciding to purchase LTC and how you decided which type of policy to buy.
You didn't mention this, but I really think that the two big questions revolving around LTC insurance are (1) how much do you have in terms of assets that you wish to protect and (2) are facilities that will accept Medicaid and/or those that will start as private pay but transition to Medicaid in your area acceptable and reasonably available.

The CCRC model discussed above intrigues me.
Another important consideration is coverage for assisted living. Some states provide coverage via Medicaid, others do not.

My parents paid a nonrefundable deposit that entitled them to pay the same monthly rate for assisted living (and skilled nursing care) as for independent living. So there was no concern about needing a higher level of care — whether temporary or permanent — since their basic expenses would not change. And they could not be kicked out since they qualified financially.

It also entitled them to move to the top of any waiting list if/when they needed a higher level of care. The waiting lists were for both lifecare residents (like my parents) and outsiders. And it was pretty long for assisted living.

As noted, the price for all this was a substantial deposit. When my mother was in the nursing home, the difference between the “off the street” rate (non-lifecare) and what she was paying was $8,000/month.

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willthrill81
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Re: Long-Term Care Decision

Post by willthrill81 » Sun Aug 11, 2019 4:36 pm

delamer wrote:
Sun Aug 11, 2019 4:30 pm
willthrill81 wrote:
Sun Aug 11, 2019 4:04 pm
cognovimus wrote:
Sun Aug 11, 2019 3:58 pm
I guess my "question" is what decision process others have used in deciding to purchase LTC and how you decided which type of policy to buy.
You didn't mention this, but I really think that the two big questions revolving around LTC insurance are (1) how much do you have in terms of assets that you wish to protect and (2) are facilities that will accept Medicaid and/or those that will start as private pay but transition to Medicaid in your area acceptable and reasonably available.

The CCRC model discussed above intrigues me.
Another important consideration is coverage for assisted living. Some states provide coverage via Medicaid, others do not.
Good point.
delamer wrote:
Sun Aug 11, 2019 4:30 pm
My parents paid a nonrefundable deposit that entitled them to pay the same monthly rate for assisted living (and skilled nursing care) as for independent living. So there was no concern about needing a higher level of care — whether temporary or permanent — since their basic expenses would not change. And they could not be kicked out since they qualified financially.

It also entitled them to move to the top of any waiting list if/when they needed a higher level of care. The waiting lists were for both lifecare residents (like my parents) and outsiders. And it was pretty long for assisted living.

As noted, the price for all this was a substantial deposit. When my mother was in the nursing home, the difference between the “off the street” rate (non-lifecare) and what she was paying was $8,000/month.
Thanks for the info. We've recently started examining possibilities for one family member, but now I'm looking down the road at other family members who would likely benefit from a CCRC down the road.

As your parents' deposit was nonrefundable, were they concerned about changes in the quality of care being provided, state of the facilities, etc., as noted above? How much was the deposit?

What level of financial qualification was needed to be shown in order for them to be guaranteed to remain there?
“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

ChrisC
Posts: 811
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Location: North Carolina

Re: Long-Term Care Decision

Post by ChrisC » Sun Aug 11, 2019 4:57 pm

cautious wrote:
Sun Aug 11, 2019 3:38 pm
Colormeado wrote:
Tue Jul 30, 2019 7:09 pm
willthrill81 wrote:
Sun Jul 28, 2019 8:50 pm
bsteiner wrote:
Sun Jul 28, 2019 9:48 am
There's not much insurance in it. If you didn't buy the insurance, the $5,000 a year would probably grow to about $200,000 in 30 years. The risk isn't that you'll need $300,000 worth of care when you're in your late 80s or 90s. The risk is that something happens for which you'll need care for 10 or 20 years. A better policy would be one where you paid the first 3 years, or the first $300,000, and the insurance company paid everything after that.
My thoughts are similar.

A nursing home runs about $100k annually in our area. If the cost for the OP is similar, that means they would still be out of pocket $40k annually. At least it's unlikely that they'll need more than the combined 6 years of care funded at that level.

The OP is, IMHO, is probably able to self-insure LTC. If either spouse could live on the survivor's benefit of $45k plus half of their portfolio (e.g. assuming that up to half of their portfolio potentially went to fund LTC, which is very unlikely), then self-insuring is probably best.

At a 4% return, $3,584 invested annually for 20 years would be worth $106k; according to the American Association for Long-term Care Insurance, 70% of LTC insurance claims are first filed when the insured is at least 80 years old, so the OP investing the premiums until at least age 80 seems like a reasonable time frame. That's a pretty sizable amount to give up in return for $360k worth of protection.
Do others think it is reasonable for us to consider self-insuring for long-term care? We each have 4-5 more years of work, so we could get to an asset level of $1.2 million with no debt. If you do not feel that is adequate, how much more do you think is required? More importantly what level of liquid assets do you think is required? Since we each will have pensions, if the right options are chosen, the surviving spouse could have closer to $55,000 per year. The COLAs are very low however.
You may also look into CCRCs as you think about future needs. I live in one in Seattle. I entered as a resident in Independent Living (IL) 10 years ago with less assets than you have listed. I chose this route because once they accepted me, by law I cannot be asked to leave for lack of funds. That eliminated the LTC insurance issues. As a retired health care professional I knew of problems people encountered with getting services paid for, at a time they didn't need a hassle. So here are my basics as an example.

I bought in at $200,000K. (There is a choice of contract, with some refundable.) The fee for my one bedroom apt (incl. parking, Dining Room allowance, all utilities, some salon services, WI-Fi etc.) is $2500 month. Supported Living (SL) is $7-10,000 mo. with round the clock staff. Many residents prefer to stay in IL and pay private caregivers for assistance with personal care, shopping, cooking etc. as needed. It works well for me and I have set up my apt to allow me to do that, and plan to even in hospice care if necessary.

But more relevant to your situation is how couples use the facilities. When one needs more care, some hire personal caregivers part or full time, but in some cases, the care is best provided in SL or Dementia Care. In the latter situation, fees are adjusted. The major benefit is that either spouse is not isolated from the larger community and all the social contact and activities at a time of major emotional stress. Children appreciate that their parents are in a situation that will respond to their health care needs, and they can enjoy social contact with them in secure settings. Also, If one passes, the other is now in an established support community. Many residents moved in here because they appreciated their parents thoughtfulness in planning for the future and relieved them of that responsibility, They want to offer that to their children. Others move here from out of state for the same reason - but also to socialize with the grandkids. Many residents are in their 90's with a few in the 100s. I'm 85, was facing declining health years ago and opted for what is to me a no-brainer now.

You are getting thoughtful advice about LT Insurance - and it may be the best choice for you. I also second the need for an elder lawyer.
I just wanted to offer another perspective.
I'm now on the waitlist for a CCRC, I have LTCi, and have a home we can spend our entire lives well into necessary home care, if needed. (The home was custom built for the prior owner who had a disabled child, with two master bedrooms on the first floor and an elevator to go on the second floor -- everything in our home has features that make it user friendly for wheelchair bound residents.) I can also self-insure with an over-sized Federal pension. I am painfully aware of what it takes to care for those in need of assisted living or skilled nursing care, financially, emotionally and logistically, with parents and siblings going through different care levels.

Our waitlisted CCRC is very expensive and we're much interested in it because it appears to provide exceptional lifestyle amenities in retirement -- it's like a college campus or resort for seniors -- with splendid activities for residents. Our CCRC would work well with our LTCi as the CCRC is an equity model type B or C plan, where home care or skilled nursing care would be covered by our CCRC under our LTCi coverage at the CCRCs discounted LTC rates. Our equity model CCRC would give our heirs the equity in our unit (and the units generally appreciate in value) when we left the campus of the CCRC. We are tracking a 4 year waiting period though we anticipate we probably wouldn't be ready for this move for 6-7 years; we're 66 and 68 at present.

We chose to have LTCi, live in our current permanent home, and go on the waitlist for this CCRC primarily because we don't want to burden our children with LTC if we need it in the future -- it also seems like it's the right financial decision for us if we want to pass more assets to our children if we ever needed LTC.
Last edited by ChrisC on Sun Aug 11, 2019 10:03 pm, edited 1 time in total.

delamer
Posts: 8746
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Re: Long-Term Care Decision

Post by delamer » Sun Aug 11, 2019 5:18 pm

willthrill81 wrote:
Sun Aug 11, 2019 4:36 pm
delamer wrote:
Sun Aug 11, 2019 4:30 pm
willthrill81 wrote:
Sun Aug 11, 2019 4:04 pm
cognovimus wrote:
Sun Aug 11, 2019 3:58 pm
I guess my "question" is what decision process others have used in deciding to purchase LTC and how you decided which type of policy to buy.
You didn't mention this, but I really think that the two big questions revolving around LTC insurance are (1) how much do you have in terms of assets that you wish to protect and (2) are facilities that will accept Medicaid and/or those that will start as private pay but transition to Medicaid in your area acceptable and reasonably available.

The CCRC model discussed above intrigues me.
Another important consideration is coverage for assisted living. Some states provide coverage via Medicaid, others do not.
Good point.
delamer wrote:
Sun Aug 11, 2019 4:30 pm
My parents paid a nonrefundable deposit that entitled them to pay the same monthly rate for assisted living (and skilled nursing care) as for independent living. So there was no concern about needing a higher level of care — whether temporary or permanent — since their basic expenses would not change. And they could not be kicked out since they qualified financially.

It also entitled them to move to the top of any waiting list if/when they needed a higher level of care. The waiting lists were for both lifecare residents (like my parents) and outsiders. And it was pretty long for assisted living.

As noted, the price for all this was a substantial deposit. When my mother was in the nursing home, the difference between the “off the street” rate (non-lifecare) and what she was paying was $8,000/month.
Thanks for the info. We've recently started examining possibilities for one family member, but now I'm looking down the road at other family members who would likely benefit from a CCRC down the road.

As your parents' deposit was nonrefundable, were they concerned about changes in the quality of care being provided, state of the facilities, etc., as noted above? How much was the deposit?

What level of financial qualification was needed to be shown in order for them to be guaranteed to remain there?
Of course there were concerns about the changes that you mentioned. But they did their due diligence, compared several places, and made a choice. Any choice you make has risks.

I din’t know the details of what they needed to qualify. Based on other situations that I’ve heard about, I’d guess it was some multiple of annual fees.

Their deposit was about 15% of their net worth at the time, plus they had my father’s pension and 2 Social Security checks.

So they still had resources if the facility deteriorated.

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Re: Long-Term Care Decision

Post by TN_Boy » Sun Aug 11, 2019 10:07 pm

cognovimus wrote:
Sun Aug 11, 2019 3:58 pm
I've also been pondering the LTC decision, and the more I read here, the more befuddling it seems. I appreciate the personal anecdotes and the stats here, but I'm still far from a decision. And this is from someone who is usually fairly decisive.

I've looked at

--traditional LTC
--traditional LTC with shared care option
--hybrid single pay
--hybrid ten pay
--hybrid 20 pay
--hybrid forever pay
--all of the above with/without various inflation protection
--self-pay (for us, this would mean "setting" aside or investing very conservatively, $ XXX,XXX of our investment savings and calling it the LTC fund, so we'd reduce our other expenses accordingly)

I've asked a lot of questions, and I feel like the LTC agent answers them, but fails to tell me what I should have asked. She keeps giving me quotes for policies that wouldn't cover the current cost of SNFs in my HCOL area, possibly because there is no way we're going to pay more than $6000-7000 a year for LTC insurance.

Like others, I don't know if we'll ever use it. In a way, we'd like to just pick one and mentally put the issue to bed. And I'm not sure it's a decision we'll make purely on number crunching. We were also among those whose house insurance paid off big time (lightning strike), and had car insurance pay off when both our children totalled cars in their twenties. So I'm coming at this as a person whose has personally benefitted from insurance. We're in our early 60's and very close to retirement, so time is ticking too. If we buy, I'd like to do it soon before our next birthdays.

My parents gave up their policies after years of price increases, and my dad promptly got very ill. Didn't matter, because LTC care would have killed him, and my mother's care kept him alive, comfortable, and as happy as possible for about 15 months. My mother, in the throes of her husband's medical crisis, got her policy reinstated. Not sure if that was a prudent decision financially but it has given her a lot of peace of mind, especially knowing she is the surviving spouse.

I guess my "question" is what decision process others have used in deciding to purchase LTC and how you decided which type of policy to buy.
Our decision making process is still going on; we are at the age where it probably makes sense to get a policy, if you are going to, rather than risk getting a disqualifying health condition.

If we go the "self-pay" route, I see absolutely no need to bucket money for LTC, or reduce our expenses. We have a "reasonable" withdrawal rate planned (in the 4%ish range before SS kicks in) and I think our portfolio and income would support all the most likely LTC situations.

Going a bit further, if "self pay" means you would lower your spending and change your investment strategy (note that investing a chunk of your nest egg very conservatively for 20 years means you probably wind up with less total money ...) , why not just pay for LTC insurance??

We are not worried about how much money any heirs get; if they get a lot, fine. If not, well, there are no guarantees.

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willthrill81
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Re: Long-Term Care Decision

Post by willthrill81 » Sun Aug 11, 2019 11:03 pm

TN_Boy wrote:
Sun Aug 11, 2019 10:07 pm
Going a bit further, if "self pay" means you would lower your spending and change your investment strategy (note that investing a chunk of your nest egg very conservatively for 20 years means you probably wind up with less total money ...) , why not just pay for LTC insurance??
Because you would retain those funds as opposed to an insurance company.

If there are either reasonable LTC facilities in your area that will either immediately take Medicaid or will take you as self-pay for a year or two and then transition to Medicaid, you could use such funds to buy a SPIA after the LTC event begins to provide the 'well' spouse with income for a certain period no longer than that spouse's life expectancy as determined by the SS Administration's tables; life annuities are not eligible for this. This works because a spouse's income does not impact the other spouse's Medicaid eligibility. The state (i.e. Medicaid) must be named the beneficiary of the annuity, so if the 'well' spouse dies before the 'certain period' is over, the state takes its share of the remainder, nearly always leaving nothing behind.
“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

WoW2012
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Re: Long-Term Care Decision

Post by WoW2012 » Sun Aug 11, 2019 11:11 pm

willthrill81 wrote:
Sun Aug 11, 2019 11:03 pm
TN_Boy wrote:
Sun Aug 11, 2019 10:07 pm
Going a bit further, if "self pay" means you would lower your spending and change your investment strategy (note that investing a chunk of your nest egg very conservatively for 20 years means you probably wind up with less total money ...) , why not just pay for LTC insurance??
Because you would retain those funds as opposed to an insurance company.

If there are either reasonable LTC facilities in your area that will either immediately take Medicaid or will take you as self-pay for a year or two and then transition to Medicaid, you could use such funds to buy a SPIA after the LTC event begins to provide the 'well' spouse with income for a certain period no longer than that spouse's life expectancy as determined by the SS Administration's tables; life annuities are not eligible for this. This works because a spouse's income does not impact the other spouse's Medicaid eligibility.

This does not work for qualified money.

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willthrill81
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Re: Long-Term Care Decision

Post by willthrill81 » Sun Aug 11, 2019 11:21 pm

WoW2012 wrote:
Sun Aug 11, 2019 11:11 pm
willthrill81 wrote:
Sun Aug 11, 2019 11:03 pm
TN_Boy wrote:
Sun Aug 11, 2019 10:07 pm
Going a bit further, if "self pay" means you would lower your spending and change your investment strategy (note that investing a chunk of your nest egg very conservatively for 20 years means you probably wind up with less total money ...) , why not just pay for LTC insurance??
Because you would retain those funds as opposed to an insurance company.

If there are either reasonable LTC facilities in your area that will either immediately take Medicaid or will take you as self-pay for a year or two and then transition to Medicaid, you could use such funds to buy a SPIA after the LTC event begins to provide the 'well' spouse with income for a certain period no longer than that spouse's life expectancy as determined by the SS Administration's tables; life annuities are not eligible for this. This works because a spouse's income does not impact the other spouse's Medicaid eligibility.
This does not work for qualified money.
Perhaps in your state, but not in mine (WA). Annuities purchased with funds from traditional and Roth IRAs are spelled out as not being available resources for Medicaid purposes.
The following annuities are not available resources, even if revocable:
An annuity described under 26 U.S.C. Sec. 408(b) or (q); or
An annuity purchased with proceeds from:
An account or trust described under 26 U.S.C. Sec. 408(a), (c), or (p);
A simplified employee pension (within the meaning of 26 U.S.C. Sec. 408(k)); or
A Roth IRA described under 26 U.S.C. Sec. 408A.
https://www.hca.wa.gov/health-care-serv ... ligibility

Nothing in the WA state law disallows annuities purchased with funds from any tax-advantaged account.

This statement below says the same is true in every state where Medicaid compliant annuities are legal.
The Medicaid Compliant Annuity is available in 48 states and the District of Columbia. It is irrevocable, non-assignable, and typically must name the state Medicaid agency as beneficiary. The product has zero cash value and is considered income only. It can be funded with either non-qualified or tax-qualified funds.
https://www.medicaidannuity.com/product ... t-annuity/

And even if what you say were true, the solution would be simple: pull the funds you wish to protect out of tax-advantaged accounts over time, which is no different than if you were using those funds to buy LTCi.
“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

WoW2012
Posts: 578
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Re: Long-Term Care Decision

Post by WoW2012 » Sun Aug 11, 2019 11:42 pm

willthrill81 wrote:
Sun Aug 11, 2019 11:21 pm
WoW2012 wrote:
Sun Aug 11, 2019 11:11 pm
willthrill81 wrote:
Sun Aug 11, 2019 11:03 pm
TN_Boy wrote:
Sun Aug 11, 2019 10:07 pm
Going a bit further, if "self pay" means you would lower your spending and change your investment strategy (note that investing a chunk of your nest egg very conservatively for 20 years means you probably wind up with less total money ...) , why not just pay for LTC insurance??
Because you would retain those funds as opposed to an insurance company.

If there are either reasonable LTC facilities in your area that will either immediately take Medicaid or will take you as self-pay for a year or two and then transition to Medicaid, you could use such funds to buy a SPIA after the LTC event begins to provide the 'well' spouse with income for a certain period no longer than that spouse's life expectancy as determined by the SS Administration's tables; life annuities are not eligible for this. This works because a spouse's income does not impact the other spouse's Medicaid eligibility.
This does not work for qualified money.
Perhaps in your state, but not in mine (WA). Annuities purchased with funds from traditional and Roth IRAs are spelled out as not being available resources for Medicaid purposes.
The following annuities are not available resources, even if revocable:
An annuity described under 26 U.S.C. Sec. 408(b) or (q); or
An annuity purchased with proceeds from:
An account or trust described under 26 U.S.C. Sec. 408(a), (c), or (p);
A simplified employee pension (within the meaning of 26 U.S.C. Sec. 408(k)); or
A Roth IRA described under 26 U.S.C. Sec. 408A.
https://www.hca.wa.gov/health-care-serv ... ligibility

Nothing in the WA state law disallows annuities purchased with funds from any tax-advantaged account.

This statement below says the same is true in every state where Medicaid compliant annuities are legal.
The Medicaid Compliant Annuity is available in 48 states and the District of Columbia. It is irrevocable, non-assignable, and typically must name the state Medicaid agency as beneficiary. The product has zero cash value and is considered income only. It can be funded with either non-qualified or tax-qualified funds.
https://www.medicaidannuity.com/product ... t-annuity/

And even if what you say were true, the solution would be simple: pull the funds you wish to protect out of tax-advantaged accounts over time, which is no different than if you were using those funds to buy LTCi.
You can't take your qualified money and buy an annuity with your spouse as the annuitant unless you pay income tax on the entire amount in the year you make this transfer to your spouse. This is true in every state.

TN_Boy
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Re: Long-Term Care Decision

Post by TN_Boy » Mon Aug 12, 2019 7:54 am

willthrill81 wrote:
Sun Aug 11, 2019 11:03 pm
TN_Boy wrote:
Sun Aug 11, 2019 10:07 pm
Going a bit further, if "self pay" means you would lower your spending and change your investment strategy (note that investing a chunk of your nest egg very conservatively for 20 years means you probably wind up with less total money ...) , why not just pay for LTC insurance??
Because you would retain those funds as opposed to an insurance company.

If there are either reasonable LTC facilities in your area that will either immediately take Medicaid or will take you as self-pay for a year or two and then transition to Medicaid, you could use such funds to buy a SPIA after the LTC event begins to provide the 'well' spouse with income for a certain period no longer than that spouse's life expectancy as determined by the SS Administration's tables; life annuities are not eligible for this. This works because a spouse's income does not impact the other spouse's Medicaid eligibility. The state (i.e. Medicaid) must be named the beneficiary of the annuity, so if the 'well' spouse dies before the 'certain period' is over, the state takes its share of the remainder, nearly always leaving nothing behind.
I'm not familiar with this approach, and would have to work through some numerical examples (which I can look up, not asking you to do this). I will note it would be foolish to use all your funds to buy an SPIA for the well spouse, so you have to decide how much is left outside the annuity. And of course you are sort of guaranteeing substantially reduced inheritance? Yeah, I'd need to see more examples.

Also don't know what the financial situation was of the poster I was responding to.

My thinking was, if you are going to make a meaningful cut in your spending (say 5k or more) AND make a mess of your asset allocation (i.e. setting aside a bucket of money invested very conservatively) AND LTC is your big fear, take your best shot at a good LTC policy (which cuts your spending of course) and be done with it. But you may have examples convincing me otherwise.

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willthrill81
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Re: Long-Term Care Decision

Post by willthrill81 » Mon Aug 12, 2019 9:09 am

WoW2012 wrote:
Sun Aug 11, 2019 11:42 pm
willthrill81 wrote:
Sun Aug 11, 2019 11:21 pm
WoW2012 wrote:
Sun Aug 11, 2019 11:11 pm
willthrill81 wrote:
Sun Aug 11, 2019 11:03 pm
TN_Boy wrote:
Sun Aug 11, 2019 10:07 pm
Going a bit further, if "self pay" means you would lower your spending and change your investment strategy (note that investing a chunk of your nest egg very conservatively for 20 years means you probably wind up with less total money ...) , why not just pay for LTC insurance??
Because you would retain those funds as opposed to an insurance company.

If there are either reasonable LTC facilities in your area that will either immediately take Medicaid or will take you as self-pay for a year or two and then transition to Medicaid, you could use such funds to buy a SPIA after the LTC event begins to provide the 'well' spouse with income for a certain period no longer than that spouse's life expectancy as determined by the SS Administration's tables; life annuities are not eligible for this. This works because a spouse's income does not impact the other spouse's Medicaid eligibility.
This does not work for qualified money.
Perhaps in your state, but not in mine (WA). Annuities purchased with funds from traditional and Roth IRAs are spelled out as not being available resources for Medicaid purposes.
The following annuities are not available resources, even if revocable:
An annuity described under 26 U.S.C. Sec. 408(b) or (q); or
An annuity purchased with proceeds from:
An account or trust described under 26 U.S.C. Sec. 408(a), (c), or (p);
A simplified employee pension (within the meaning of 26 U.S.C. Sec. 408(k)); or
A Roth IRA described under 26 U.S.C. Sec. 408A.
https://www.hca.wa.gov/health-care-serv ... ligibility

Nothing in the WA state law disallows annuities purchased with funds from any tax-advantaged account.

This statement below says the same is true in every state where Medicaid compliant annuities are legal.
The Medicaid Compliant Annuity is available in 48 states and the District of Columbia. It is irrevocable, non-assignable, and typically must name the state Medicaid agency as beneficiary. The product has zero cash value and is considered income only. It can be funded with either non-qualified or tax-qualified funds.
https://www.medicaidannuity.com/product ... t-annuity/

And even if what you say were true, the solution would be simple: pull the funds you wish to protect out of tax-advantaged accounts over time, which is no different than if you were using those funds to buy LTCi.
You can't take your qualified money and buy an annuity with your spouse as the annuitant unless you pay income tax on the entire amount in the year you make this transfer to your spouse. This is true in every state.
Please cite the regulations, presumably from the IRS, that require this. I cannot find any.

What I have found is this. It says nothing about making your spouse the annuitant.
Q. If I decide to roll over my IRA, 401(k), or lump sum pension payment into an annuity, will I be hit with a distribution tax?

A. NO. The reason you're permitted to roll over these payments into an annuity tax-free is because when you buy an annuity with IRA or 401k money the first thing the insurance company does is create an IRA holding account to receive your transferred funds.

So really buying an annuity with IRA money is the same as moving your money from its current IRA or 401k trustee to another IRA trustee. This kind of transaction is considered a "direct transfer" or a "direct rollover" which is tax-free. You will owe taxes on the monthly income you receive but not on the transfer.
https://www.immediateannuities.com/roll ... a-or-401k/
“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

TN_Boy
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Re: Long-Term Care Decision

Post by TN_Boy » Mon Aug 12, 2019 11:12 am

TN_Boy wrote:
Mon Aug 12, 2019 7:54 am
willthrill81 wrote:
Sun Aug 11, 2019 11:03 pm
TN_Boy wrote:
Sun Aug 11, 2019 10:07 pm
Going a bit further, if "self pay" means you would lower your spending and change your investment strategy (note that investing a chunk of your nest egg very conservatively for 20 years means you probably wind up with less total money ...) , why not just pay for LTC insurance??
Because you would retain those funds as opposed to an insurance company.

If there are either reasonable LTC facilities in your area that will either immediately take Medicaid or will take you as self-pay for a year or two and then transition to Medicaid, you could use such funds to buy a SPIA after the LTC event begins to provide the 'well' spouse with income for a certain period no longer than that spouse's life expectancy as determined by the SS Administration's tables; life annuities are not eligible for this. This works because a spouse's income does not impact the other spouse's Medicaid eligibility. The state (i.e. Medicaid) must be named the beneficiary of the annuity, so if the 'well' spouse dies before the 'certain period' is over, the state takes its share of the remainder, nearly always leaving nothing behind.
I'm not familiar with this approach, and would have to work through some numerical examples (which I can look up, not asking you to do this). I will note it would be foolish to use all your funds to buy an SPIA for the well spouse, so you have to decide how much is left outside the annuity. And of course you are sort of guaranteeing substantially reduced inheritance? Yeah, I'd need to see more examples.

Also don't know what the financial situation was of the poster I was responding to.

My thinking was, if you are going to make a meaningful cut in your spending (say 5k or more) AND make a mess of your asset allocation (i.e. setting aside a bucket of money invested very conservatively) AND LTC is your big fear, take your best shot at a good LTC policy (which cuts your spending of course) and be done with it. But you may have examples convincing me otherwise.
Following up myself ...

Here is one take on the strategy:

https://www.kiplinger.com/article/retir ... vings.html

and another

https://www.medicaidplanningassistance. ... y-annuity/

It doesn't sound like a great solution if you have any kind of decent nest egg. So I'm back to this comment:

"Also don't know what the financial situation was of the poster I was responding to."

Which would surely affect thinking on self-pay versus LTC insurance.

My thinking was (just making up numbers to illustrate the point) suppose you have a 750k nest egg. From that you can pull 30k-ish a year (hand-waving 4% rule). Okay, per the poster I responded to, they want to self-insure by setting aside part of the money and reducing spending.

1) How much are you going to set aside? 100k? 300k? Note that the rate of inflation for LTC is at least as high as overall inflation, so if you invest that 100k or 300k "conservatively" you could wind up with less than you think to pay for care later.

2) If I set aside a full 300k, my safe draw goes to less than 20k/year (using the 4% hand-waving rule).

Thus you have substantially reduced your spending for like 20 years (10k/year) to cover that 300k in LTC. How does that compare to fully investing your money and paying for a similar amount of LTC?

I really don't like setting aside the money and investing it differently.

Of course, you could also NOT set aside the money, OR reduce spending and just plan on the SPIA. Or not take the SPIA and pay for out of pocket ... all sorts of choices!

If my resources were limited, I'd probably go with NOT setting aside the money and investing it differently, but perhaps slightly reducing spending (maybe by 3k to 5k per year, sorta making up numbers again ..) and then be considering the SPIA approach, assuming it doesn't meet with problematic legal challenges.

But honestly, if my big fear was major LTC expenses, I'd look a lot harder at LTC insurance, despite the pitfalls. I just don't think that one should let retirement planning be driven by that fear -- most people are not going to spend a very long time in a very expensive facility. Yes it happens.

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willthrill81
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Re: Long-Term Care Decision

Post by willthrill81 » Mon Aug 12, 2019 11:29 am

TN_Boy wrote:
Mon Aug 12, 2019 11:12 am
TN_Boy wrote:
Mon Aug 12, 2019 7:54 am
willthrill81 wrote:
Sun Aug 11, 2019 11:03 pm
TN_Boy wrote:
Sun Aug 11, 2019 10:07 pm
Going a bit further, if "self pay" means you would lower your spending and change your investment strategy (note that investing a chunk of your nest egg very conservatively for 20 years means you probably wind up with less total money ...) , why not just pay for LTC insurance??
Because you would retain those funds as opposed to an insurance company.

If there are either reasonable LTC facilities in your area that will either immediately take Medicaid or will take you as self-pay for a year or two and then transition to Medicaid, you could use such funds to buy a SPIA after the LTC event begins to provide the 'well' spouse with income for a certain period no longer than that spouse's life expectancy as determined by the SS Administration's tables; life annuities are not eligible for this. This works because a spouse's income does not impact the other spouse's Medicaid eligibility. The state (i.e. Medicaid) must be named the beneficiary of the annuity, so if the 'well' spouse dies before the 'certain period' is over, the state takes its share of the remainder, nearly always leaving nothing behind.
I'm not familiar with this approach, and would have to work through some numerical examples (which I can look up, not asking you to do this). I will note it would be foolish to use all your funds to buy an SPIA for the well spouse, so you have to decide how much is left outside the annuity. And of course you are sort of guaranteeing substantially reduced inheritance? Yeah, I'd need to see more examples.

Also don't know what the financial situation was of the poster I was responding to.

My thinking was, if you are going to make a meaningful cut in your spending (say 5k or more) AND make a mess of your asset allocation (i.e. setting aside a bucket of money invested very conservatively) AND LTC is your big fear, take your best shot at a good LTC policy (which cuts your spending of course) and be done with it. But you may have examples convincing me otherwise.
Following up myself ...

Here is one take on the strategy:

https://www.kiplinger.com/article/retir ... vings.html

and another

https://www.medicaidplanningassistance. ... y-annuity/

It doesn't sound like a great solution if you have any kind of decent nest egg.
I agree that Medicaid annuities are not a great solution. Sadly, there are no great solutions for those that have ~$300k to ~$1.5 million in assets. Those with fewer assets will have to rely on Medicaid, and those with more can very likely self-insure the risk.
TN_Boy wrote:
Mon Aug 12, 2019 11:12 am
If my resources were limited, I'd probably go with NOT setting aside the money and investing it differently, but perhaps slightly reducing spending (maybe by 3k to 5k per year, sorta making up numbers again ..) and then be considering the SPIA approach, assuming it doesn't meet with problematic legal challenges.

But honestly, if my big fear was major LTC expenses, I'd look a lot harder at LTC insurance, despite the pitfalls. I just don't think that one should let retirement planning be driven by that fear -- most people are not going to spend a very long time in a very expensive facility. Yes it happens.
I agree. Medicaid annuities and/or irrevocable trusts seem to be potentially be partial solutions to the LTC issue for those who can't self-insure or can't/won't pay for LTC insurance.
“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

WoW2012
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Re: Long-Term Care Decision

Post by WoW2012 » Mon Aug 12, 2019 1:15 pm

willthrill81 wrote:
Mon Aug 12, 2019 9:09 am
WoW2012 wrote:
Sun Aug 11, 2019 11:42 pm
willthrill81 wrote:
Sun Aug 11, 2019 11:21 pm
WoW2012 wrote:
Sun Aug 11, 2019 11:11 pm
willthrill81 wrote:
Sun Aug 11, 2019 11:03 pm


Because you would retain those funds as opposed to an insurance company.

If there are either reasonable LTC facilities in your area that will either immediately take Medicaid or will take you as self-pay for a year or two and then transition to Medicaid, you could use such funds to buy a SPIA after the LTC event begins to provide the 'well' spouse with income for a certain period no longer than that spouse's life expectancy as determined by the SS Administration's tables; life annuities are not eligible for this. This works because a spouse's income does not impact the other spouse's Medicaid eligibility.
This does not work for qualified money.
Perhaps in your state, but not in mine (WA). Annuities purchased with funds from traditional and Roth IRAs are spelled out as not being available resources for Medicaid purposes.
The following annuities are not available resources, even if revocable:
An annuity described under 26 U.S.C. Sec. 408(b) or (q); or
An annuity purchased with proceeds from:
An account or trust described under 26 U.S.C. Sec. 408(a), (c), or (p);
A simplified employee pension (within the meaning of 26 U.S.C. Sec. 408(k)); or
A Roth IRA described under 26 U.S.C. Sec. 408A.
https://www.hca.wa.gov/health-care-serv ... ligibility

Nothing in the WA state law disallows annuities purchased with funds from any tax-advantaged account.

This statement below says the same is true in every state where Medicaid compliant annuities are legal.
The Medicaid Compliant Annuity is available in 48 states and the District of Columbia. It is irrevocable, non-assignable, and typically must name the state Medicaid agency as beneficiary. The product has zero cash value and is considered income only. It can be funded with either non-qualified or tax-qualified funds.
https://www.medicaidannuity.com/product ... t-annuity/

And even if what you say were true, the solution would be simple: pull the funds you wish to protect out of tax-advantaged accounts over time, which is no different than if you were using those funds to buy LTCi.
You can't take your qualified money and buy an annuity with your spouse as the annuitant unless you pay income tax on the entire amount in the year you make this transfer to your spouse. This is true in every state.
Please cite the regulations, presumably from the IRS, that require this. I cannot find any.

What I have found is this. It says nothing about making your spouse the annuitant.
Q. If I decide to roll over my IRA, 401(k), or lump sum pension payment into an annuity, will I be hit with a distribution tax?

A. NO. The reason you're permitted to roll over these payments into an annuity tax-free is because when you buy an annuity with IRA or 401k money the first thing the insurance company does is create an IRA holding account to receive your transferred funds.

So really buying an annuity with IRA money is the same as moving your money from its current IRA or 401k trustee to another IRA trustee. This kind of transaction is considered a "direct transfer" or a "direct rollover" which is tax-free. You will owe taxes on the monthly income you receive but not on the transfer.
https://www.immediateannuities.com/roll ... a-or-401k/


If you transfer your IRA into an annuity, you must be the owner of the annuity and you must receive the income from the annuity. That is why Medicaid annuities can't protect the IRA of the spouse who is applying for Medicaid. If you don't believe me, call the people at immediateannuities.com. They're nice people. I know them well. I used to work there.

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willthrill81
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Re: Long-Term Care Decision

Post by willthrill81 » Mon Aug 12, 2019 2:07 pm

WoW2012 wrote:
Mon Aug 12, 2019 1:15 pm
willthrill81 wrote:
Mon Aug 12, 2019 9:09 am
WoW2012 wrote:
Sun Aug 11, 2019 11:42 pm
willthrill81 wrote:
Sun Aug 11, 2019 11:21 pm
WoW2012 wrote:
Sun Aug 11, 2019 11:11 pm


This does not work for qualified money.
Perhaps in your state, but not in mine (WA). Annuities purchased with funds from traditional and Roth IRAs are spelled out as not being available resources for Medicaid purposes.
The following annuities are not available resources, even if revocable:
An annuity described under 26 U.S.C. Sec. 408(b) or (q); or
An annuity purchased with proceeds from:
An account or trust described under 26 U.S.C. Sec. 408(a), (c), or (p);
A simplified employee pension (within the meaning of 26 U.S.C. Sec. 408(k)); or
A Roth IRA described under 26 U.S.C. Sec. 408A.
https://www.hca.wa.gov/health-care-serv ... ligibility

Nothing in the WA state law disallows annuities purchased with funds from any tax-advantaged account.

This statement below says the same is true in every state where Medicaid compliant annuities are legal.
The Medicaid Compliant Annuity is available in 48 states and the District of Columbia. It is irrevocable, non-assignable, and typically must name the state Medicaid agency as beneficiary. The product has zero cash value and is considered income only. It can be funded with either non-qualified or tax-qualified funds.
https://www.medicaidannuity.com/product ... t-annuity/

And even if what you say were true, the solution would be simple: pull the funds you wish to protect out of tax-advantaged accounts over time, which is no different than if you were using those funds to buy LTCi.
You can't take your qualified money and buy an annuity with your spouse as the annuitant unless you pay income tax on the entire amount in the year you make this transfer to your spouse. This is true in every state.
Please cite the regulations, presumably from the IRS, that require this. I cannot find any.

What I have found is this. It says nothing about making your spouse the annuitant.
Q. If I decide to roll over my IRA, 401(k), or lump sum pension payment into an annuity, will I be hit with a distribution tax?

A. NO. The reason you're permitted to roll over these payments into an annuity tax-free is because when you buy an annuity with IRA or 401k money the first thing the insurance company does is create an IRA holding account to receive your transferred funds.

So really buying an annuity with IRA money is the same as moving your money from its current IRA or 401k trustee to another IRA trustee. This kind of transaction is considered a "direct transfer" or a "direct rollover" which is tax-free. You will owe taxes on the monthly income you receive but not on the transfer.
https://www.immediateannuities.com/roll ... a-or-401k/
If you transfer your IRA into an annuity, you must be the owner of the annuity and you must receive the income from the annuity. That is why Medicaid annuities can't protect the IRA of the spouse who is applying for Medicaid. If you don't believe me, call the people at immediateannuities.com. They're nice people. I know them well. I used to work there.
Again, please cite the regulations that require this.
“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

Silk McCue
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Re: Long-Term Care Decision

Post by Silk McCue » Mon Aug 12, 2019 2:20 pm

willthrill81 wrote:
Mon Aug 12, 2019 2:07 pm

Again, please cite the regulations that require this.
This is common sense if you understand the concept of "Individual Retirement Account'. You can do your own research or call immediateannuities.com and ask them as suggested.

Try having your RMDS paid to someone else directly so that the income shows up on their taxes and not yours. Same thing. Can't be done and no need to find a regulation to prove it so.

Cheers

WoW2012
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Re: Long-Term Care Decision

Post by WoW2012 » Mon Aug 12, 2019 3:00 pm

Silk McCue wrote:
Mon Aug 12, 2019 2:20 pm
willthrill81 wrote:
Mon Aug 12, 2019 2:07 pm

Again, please cite the regulations that require this.
This is common sense if you understand the concept of "Individual Retirement Account'. You can do your own research or call immediateannuities.com and ask them as suggested.

Try having your RMDS paid to someone else directly so that the income shows up on their taxes and not yours. Same thing. Can't be done and no need to find a regulation to prove it so.

Cheers

Just google "can my ira be transferred to my spouse".

The answer is "NO", unless you divorce her or you die.

None of the examples you gave prove your strategy to be true.

You can buy a Medicaid compliant annuity with YOUR IRA and YOU will receive ALL the income from it (which won't help your wife at all).
Your wife can buy a Medicaid compliant annuity with HER IRA and SHE will receive all the income from it (but that won't protect your IRA for her).

The "I" in IRA stands for Individual for a reason.

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willthrill81
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Re: Long-Term Care Decision

Post by willthrill81 » Mon Aug 12, 2019 3:17 pm

WoW2012 wrote:
Mon Aug 12, 2019 3:00 pm
Silk McCue wrote:
Mon Aug 12, 2019 2:20 pm
willthrill81 wrote:
Mon Aug 12, 2019 2:07 pm

Again, please cite the regulations that require this.
This is common sense if you understand the concept of "Individual Retirement Account'. You can do your own research or call immediateannuities.com and ask them as suggested.

Try having your RMDS paid to someone else directly so that the income shows up on their taxes and not yours. Same thing. Can't be done and no need to find a regulation to prove it so.

Cheers

Just google "can my ira be transferred to my spouse".

The answer is "NO", unless you divorce her or you die.

None of the examples you gave prove your strategy to be true.

You can buy a Medicaid compliant annuity with YOUR IRA and YOU will receive ALL the income from it (which won't help your wife at all).
Your wife can buy a Medicaid compliant annuity with HER IRA and SHE will receive all the income from it (but that won't protect your IRA for her).

The "I" in IRA stands for Individual for a reason.
Fair point.

This isn't likely to be much of a problem for the person who is likely to consider a Medicaid-compliant annuity (MCA). Someone with $2 million and significant SS benefits and/or a pension is very likely better off self-insuring. As the sources that discuss MCAs often note, most of those buying one are doing so with $200k-$300k. Even double that amount could likely be withdrawn from a traditional IRA or 401k over 4-6 years (i.e. before the LTC event) and never be taxed above the 12% bracket, and the funds could be reinvested after being withdrawn. That's a small price to pay to then have the ability to buy a MCA and have one's spouse be the beneficiary. And if a LTC event occurred before the funds are withdrawn, the solution is simple: withdraw the funds, pay the taxes, and buy a MCA with the remainder. Protecting 65-90% of one's assets is better than 0% protection.

Further, most of those who would consider a MCA in the first place seem to be unable or unlikely to buy LTCi.
“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

WoW2012
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Re: Long-Term Care Decision

Post by WoW2012 » Mon Aug 12, 2019 3:34 pm

willthrill81 wrote:
Mon Aug 12, 2019 3:17 pm

Fair point.

This isn't likely to be much of a problem for the person who is likely to consider a Medicaid-compliant annuity (MCA). Someone with $2 million and significant SS benefits and/or a pension is very likely better off self-insuring. As the sources that discuss MCAs often note, most of those buying one are doing so with $200k-$300k. Even double that amount could likely be withdrawn from a traditional IRA or 401k over 4-6 years (i.e. before the LTC event) and never be taxed above the 12% bracket, and the funds could be reinvested after being withdrawn. That's a small price to pay to then have the ability to buy a MCA and have one's spouse be the beneficiary. And if a LTC event occurred before the funds are withdrawn, the solution is simple: withdraw the funds, pay the taxes, and buy a MCA with the remainder. Protecting 65-90% of one's assets is better than 0% protection.

Further, most of those who would consider a MCA in the first place seem to be unable or unlikely to buy LTCi.

All that's missing is the crystal ball needed to know the date of the event.

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willthrill81
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Re: Long-Term Care Decision

Post by willthrill81 » Mon Aug 12, 2019 3:39 pm

WoW2012 wrote:
Mon Aug 12, 2019 3:34 pm
willthrill81 wrote:
Mon Aug 12, 2019 3:17 pm

Fair point.

This isn't likely to be much of a problem for the person who is likely to consider a Medicaid-compliant annuity (MCA). Someone with $2 million and significant SS benefits and/or a pension is very likely better off self-insuring. As the sources that discuss MCAs often note, most of those buying one are doing so with $200k-$300k. Even double that amount could likely be withdrawn from a traditional IRA or 401k over 4-6 years (i.e. before the LTC event) and never be taxed above the 12% bracket, and the funds could be reinvested after being withdrawn. That's a small price to pay to then have the ability to buy a MCA and have one's spouse be the beneficiary. And if a LTC event occurred before the funds are withdrawn, the solution is simple: withdraw the funds, pay the taxes, and buy a MCA with the remainder. Protecting 65-90% of one's assets is better than 0% protection.

Further, most of those who would consider a MCA in the first place seem to be unable or unlikely to buy LTCi.
All that's missing is the crystal ball needed to know the date of the event.
For the person worried about that risk, they could buy a LTCi policy, and once they have adequate funds pulled out of tax-advantaged accounts, get rid of the policy. That's a lot cheaper than a 65 year old having a 70% likelihood of paying for a LTC policy for 15+ years before even making a claim (per the LTCIA's data).
“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

cognovimus
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Re: Long-Term Care Decision

Post by cognovimus » Tue Aug 13, 2019 8:15 am

willthrill81 wrote:
Sun Aug 11, 2019 4:04 pm
cognovimus wrote:
Sun Aug 11, 2019 3:58 pm
I guess my "question" is what decision process others have used in deciding to purchase LTC and how you decided which type of policy to buy.
You didn't mention this, but I really think that the two big questions revolving around LTC insurance are (1) how much do you have in terms of assets that you wish to protect and (2) are facilities that will accept Medicaid and/or those that will start as private pay but transition to Medicaid in your area acceptable and reasonably available.

The CCRC model discussed above intrigues me.
Thank you for the response re self pay. NW = about $4 million (not counting house), primarily for funding retirement needs. If there is some left over for heirs, great. That will depend on the market and our personal health situation.

I'm looking at the other options, including traditional and a 10-20 pay hybrid. None of them are that great and don't cover even current costs, but would help.

I haven't considered facilities that accept Medicaid. I will look into that, but I've known of people who tried to "protect" assets from Medicaid and ended up financially strapped. Had to break out of the trusts to fund living expenses.

I'm familiar with CCRCs. It's a good idea, but they all have different models. The one I know best is pay as you go (no deposit/buy-in), you pay more as you need more care, and I'm sure they would kick you out if your needs exceeded your financial resources. The person I know of who lived there died in independent living after an acute illness. There is a lot of death and sickness in these places, even the IP section. And a lot of cliques, like a high school or college. Because it is fairly dense housing, novovirus is not unknown. I wouldn't go there unless I really needed to because I live in a HCOL area and even IP is very expensive. But my children and grandchildren are here, so I wouldn't go elsewhere unless they moved.

TN_Boy
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Re: Long-Term Care Decision

Post by TN_Boy » Tue Aug 13, 2019 8:36 am

cognovimus wrote:
Tue Aug 13, 2019 8:15 am
willthrill81 wrote:
Sun Aug 11, 2019 4:04 pm
cognovimus wrote:
Sun Aug 11, 2019 3:58 pm
I guess my "question" is what decision process others have used in deciding to purchase LTC and how you decided which type of policy to buy.
You didn't mention this, but I really think that the two big questions revolving around LTC insurance are (1) how much do you have in terms of assets that you wish to protect and (2) are facilities that will accept Medicaid and/or those that will start as private pay but transition to Medicaid in your area acceptable and reasonably available.

The CCRC model discussed above intrigues me.
Thank you for the response re self pay. NW = about $4 million (not counting house), primarily for funding retirement needs. If there is some left over for heirs, great. That will depend on the market and our personal health situation.

I'm looking at the other options, including traditional and a 10-20 pay hybrid. None of them are that great and don't cover even current costs, but would help.

I haven't considered facilities that accept Medicaid. I will look into that, but I've known of people who tried to "protect" assets from Medicaid and ended up financially strapped. Had to break out of the trusts to fund living expenses.

I'm familiar with CCRCs. It's a good idea, but they all have different models. The one I know best is pay as you go (no deposit/buy-in), you pay more as you need more care, and I'm sure they would kick you out if your needs exceeded your financial resources. The person I know of who lived there died in independent living after an acute illness. There is a lot of death and sickness in these places, even the IP section. And a lot of cliques, like a high school or college. Because it is fairly dense housing, novovirus is not unknown. I wouldn't go there unless I really needed to because I live in a HCOL area and even IP is very expensive. But my children and grandchildren are here, so I wouldn't go elsewhere unless they moved.
4M + house? How about SS or pensions? How much do you plan to pull from that 4m yearly?

Assuming your expenses are reasonable for a 4m portfolio (pulling less than maybe 160k a year from it), I believe most would say you have no need to buy LTC insurance. I would reiterate something I said before, I cannot imagine why you would want to set aside part of that money and reduce spending. With 4m, unless you are a pretty big spender, that is just not needed.

How much do you think you would need to "reserve" for LTC (and what is that number based on) and why do you think those funds need to be segregated?

As you live in a HCOL and have a pretty big nest egg, I'm guessing your house is worth a lot as well (paid off?). The equity in a house is another way to pay for some LTC expenses.

At your asset level, I don't believe thinking about medicaid issues is very useful. You will not be needing medicaid.

robertalpert
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Re: Long-Term Care Decision

Post by robertalpert » Tue Aug 13, 2019 8:45 am

stan1 wrote:
Sun Jul 28, 2019 1:07 pm
bsteiner wrote:
Sun Jul 28, 2019 9:48 am
A better policy would be one where you paid the first 3 years, or the first $300,000, and the insurance company paid everything after that.
But it doesn't exist.
This was the exact proposal as an original component of ACA. But was deleted prior to passage of ACA. Perhaps it could be included next time there is future national healthcare legislation.

WoW2012
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Re: Long-Term Care Decision

Post by WoW2012 » Tue Aug 13, 2019 9:57 am

robertalpert wrote:
Tue Aug 13, 2019 8:45 am
stan1 wrote:
Sun Jul 28, 2019 1:07 pm
bsteiner wrote:
Sun Jul 28, 2019 9:48 am
A better policy would be one where you paid the first 3 years, or the first $300,000, and the insurance company paid everything after that.
But it doesn't exist.
This was the exact proposal as an original component of ACA. But was deleted prior to passage of ACA. Perhaps it could be included next time there is future national healthcare legislation.

Incorrect. There was never such a proposal like that in the ACA.
The ACA included the "C.L.A.S.S. Act".
"The CLASS Act legislation states that the program will pay eligible beneficiaries “not less than an average of $50 per day”, depending upon level of disability. That means that some beneficiaries may receive less than $50 per day and others more, depending upon how disabled they are (e.g. depending upon how many Activities of Daily Living they need assistance with). The Secretary of HHS has until October of 2012 to release the details of the benefits, as well as the premium amounts."

However, the Secretary of HHS decided that the CLASS Act was not actuarially sound and Congress voted, and Pres. Obama signed, a law nullifying the CLASS Act.

The cost of long-term care in this country is greater than the Medicare budget. The likelihood of the federal gov't taking on this expense is very low. Even Bernie Saunders "Medicare For All" plan does not provide free long-term care in facilities.

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willthrill81
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Re: Long-Term Care Decision

Post by willthrill81 » Tue Aug 13, 2019 10:16 am

TN_Boy wrote:
Tue Aug 13, 2019 8:36 am
cognovimus wrote:
Tue Aug 13, 2019 8:15 am
willthrill81 wrote:
Sun Aug 11, 2019 4:04 pm
cognovimus wrote:
Sun Aug 11, 2019 3:58 pm
I guess my "question" is what decision process others have used in deciding to purchase LTC and how you decided which type of policy to buy.
You didn't mention this, but I really think that the two big questions revolving around LTC insurance are (1) how much do you have in terms of assets that you wish to protect and (2) are facilities that will accept Medicaid and/or those that will start as private pay but transition to Medicaid in your area acceptable and reasonably available.

The CCRC model discussed above intrigues me.
Thank you for the response re self pay. NW = about $4 million (not counting house), primarily for funding retirement needs. If there is some left over for heirs, great. That will depend on the market and our personal health situation.

I'm looking at the other options, including traditional and a 10-20 pay hybrid. None of them are that great and don't cover even current costs, but would help.

I haven't considered facilities that accept Medicaid. I will look into that, but I've known of people who tried to "protect" assets from Medicaid and ended up financially strapped. Had to break out of the trusts to fund living expenses.

I'm familiar with CCRCs. It's a good idea, but they all have different models. The one I know best is pay as you go (no deposit/buy-in), you pay more as you need more care, and I'm sure they would kick you out if your needs exceeded your financial resources. The person I know of who lived there died in independent living after an acute illness. There is a lot of death and sickness in these places, even the IP section. And a lot of cliques, like a high school or college. Because it is fairly dense housing, novovirus is not unknown. I wouldn't go there unless I really needed to because I live in a HCOL area and even IP is very expensive. But my children and grandchildren are here, so I wouldn't go elsewhere unless they moved.
4M + house? How about SS or pensions? How much do you plan to pull from that 4m yearly?

Assuming your expenses are reasonable for a 4m portfolio (pulling less than maybe 160k a year from it), I believe most would say you have no need to buy LTC insurance. I would reiterate something I said before, I cannot imagine why you would want to set aside part of that money and reduce spending. With 4m, unless you are a pretty big spender, that is just not needed.

How much do you think you would need to "reserve" for LTC (and what is that number based on) and why do you think those funds need to be segregated?

As you live in a HCOL and have a pretty big nest egg, I'm guessing your house is worth a lot as well (paid off?). The equity in a house is another way to pay for some LTC expenses.

At your asset level, I don't believe thinking about medicaid issues is very useful. You will not be needing medicaid.
$4 million, plus SS benefits, maybe other income, and a paid for home means that he has no need at all for LTC insurance. Assuming 4% withdrawals, his portfolio alone should easily provide $160k of annual income, more than enough to cover LTC. Everything else is added safety.
“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

WoW2012
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Re: Long-Term Care Decision

Post by WoW2012 » Tue Aug 13, 2019 12:22 pm

willthrill81 wrote:
Tue Aug 13, 2019 10:16 am
$4 million, plus SS benefits, maybe other income, and a paid for home means that he has no need at all for LTC insurance. Assuming 4% withdrawals, his portfolio alone should easily provide $160k of annual income, more than enough to cover LTC. Everything else is added safety.

...and he has no need for collision insurance on the Mercedes he paid cash for, but he has the collision insurance anyway because it makes sense.

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ResearchMed
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Re: Long-Term Care Decision

Post by ResearchMed » Tue Aug 13, 2019 1:04 pm

WoW2012 wrote:
Tue Aug 13, 2019 12:22 pm
willthrill81 wrote:
Tue Aug 13, 2019 10:16 am
$4 million, plus SS benefits, maybe other income, and a paid for home means that he has no need at all for LTC insurance. Assuming 4% withdrawals, his portfolio alone should easily provide $160k of annual income, more than enough to cover LTC. Everything else is added safety.

...and he has no need for collision insurance on the Mercedes he paid cash for, but he has the collision insurance anyway because it makes sense.
Just what does "makes sense" mean, and from whose perspective?

Not everyone has the same cost/benefit views, nor need/ability to take risks, etc. (and etc....!).

Your input would be more valuable, and received better, if you stuck with more objective issues.
In some cases, we might all (or mostly) agree about whether something is "sensible", but someone with $4M having collision insurance on (assuming) a relatively regular priced car (and not something a baby sibling of the $18M Bugatti in the news) is *not* one of those. (That has been made abundantly clear simply by discussions here on BH!)

RM
This signature is a placebo. You are in the control group.

cognovimus
Posts: 66
Joined: Sat Aug 10, 2019 1:07 pm

Re: Long-Term Care Decision

Post by cognovimus » Tue Aug 13, 2019 1:33 pm

willthrill81 wrote:
Tue Aug 13, 2019 10:16 am
TN_Boy wrote:
Tue Aug 13, 2019 8:36 am
cognovimus wrote:
Tue Aug 13, 2019 8:15 am
willthrill81 wrote:
Sun Aug 11, 2019 4:04 pm
cognovimus wrote:
Sun Aug 11, 2019 3:58 pm
I guess my "question" is what decision process others have used in deciding to purchase LTC and how you decided which type of policy to buy.
You didn't mention this, but I really think that the two big questions revolving around LTC insurance are (1) how much do you have in terms of assets that you wish to protect and (2) are facilities that will accept Medicaid and/or those that will start as private pay but transition to Medicaid in your area acceptable and reasonably available.

The CCRC model discussed above intrigues me.
Thank you for the response re self pay. NW = about $4 million (not counting house), primarily for funding retirement needs. If there is some left over for heirs, great. That will depend on the market and our personal health situation.

I'm looking at the other options, including traditional and a 10-20 pay hybrid. None of them are that great and don't cover even current costs, but would help.

I haven't considered facilities that accept Medicaid. I will look into that, but I've known of people who tried to "protect" assets from Medicaid and ended up financially strapped. Had to break out of the trusts to fund living expenses.

I'm familiar with CCRCs. It's a good idea, but they all have different models. The one I know best is pay as you go (no deposit/buy-in), you pay more as you need more care, and I'm sure they would kick you out if your needs exceeded your financial resources. The person I know of who lived there died in independent living after an acute illness. There is a lot of death and sickness in these places, even the IP section. And a lot of cliques, like a high school or college. Because it is fairly dense housing, novovirus is not unknown. I wouldn't go there unless I really needed to because I live in a HCOL area and even IP is very expensive. But my children and grandchildren are here, so I wouldn't go elsewhere unless they moved.
4M + house? How about SS or pensions? How much do you plan to pull from that 4m yearly?

Assuming your expenses are reasonable for a 4m portfolio (pulling less than maybe 160k a year from it), I believe most would say you have no need to buy LTC insurance. I would reiterate something I said before, I cannot imagine why you would want to set aside part of that money and reduce spending. With 4m, unless you are a pretty big spender, that is just not needed.

How much do you think you would need to "reserve" for LTC (and what is that number based on) and why do you think those funds need to be segregated?

As you live in a HCOL and have a pretty big nest egg, I'm guessing your house is worth a lot as well (paid off?). The equity in a house is another way to pay for some LTC expenses.

At your asset level, I don't believe thinking about medicaid issues is very useful. You will not be needing medicaid.
$4 million, plus SS benefits, maybe other income, and a paid for home means that he has no need at all for LTC insurance. Assuming 4% withdrawals, his portfolio alone should easily provide $160k of annual income, more than enough to cover LTC. Everything else is added safety.
Hmm, that's somewhat reassuring, but we will be early retirees (63/61). As such we may need to make our nest egg last a little longer than most. We have no pensions and won't be able to live on interest and dividends; we'll be drawing down assets. We have a modest paid-off home, but I haven't relied upon that in terms of expenses because we need somewhere to live and prefer to be near family. Total after tax expenses are about $168,000 (today's dollars) but that's padded with estimated LTC expenses and out of pocket medical premiums for the years between COBRA & Medicare, includes increased travel post-retirement, and a new car here and there. When we run the FIdelity and PC retirement planners, we get results that indicate we're "on track" but not batting it out of the park. Also availed ourselves of a "fee only" planner whose MC analysis rendered 90% of the trials successful. So we're moving ahead with our plan, but understand we may need to revisit expenses on the fun stuff.

bearwithbear
Posts: 31
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Re: Long-Term Care Decision

Post by bearwithbear » Tue Aug 13, 2019 1:50 pm

Cognovimus,

Stop it.
Stop worrying that every bad possibility will happen (did I miss World War Z)
4 million and social security more than makes this work.
Self fund long term care.
Done.

Bear

ps. I have this conversation with my self on a too regular basis. Not that the numbers change, just a little hard wired to worry.
Getting better about it. Keep being reminded on this site that you only live once. So live.

WoW2012
Posts: 578
Joined: Sun Dec 23, 2012 11:28 am

Re: Long-Term Care Decision

Post by WoW2012 » Tue Aug 13, 2019 2:08 pm

ResearchMed wrote:
Tue Aug 13, 2019 1:04 pm
WoW2012 wrote:
Tue Aug 13, 2019 12:22 pm
willthrill81 wrote:
Tue Aug 13, 2019 10:16 am
$4 million, plus SS benefits, maybe other income, and a paid for home means that he has no need at all for LTC insurance. Assuming 4% withdrawals, his portfolio alone should easily provide $160k of annual income, more than enough to cover LTC. Everything else is added safety.

...and he has no need for collision insurance on the Mercedes he paid cash for, but he has the collision insurance anyway because it makes sense.
Just what does "makes sense" mean, and from whose perspective?

Not everyone has the same cost/benefit views, nor need/ability to take risks, etc. (and etc....!).

Your input would be more valuable, and received better, if you stuck with more objective issues.
In some cases, we might all (or mostly) agree about whether something is "sensible", but someone with $4M having collision insurance on (assuming) a relatively regular priced car (and not something a baby sibling of the $18M Bugatti in the news) is *not* one of those. (That has been made abundantly clear simply by discussions here on BH!)

RM
I'm sorry if I touched a nerve.
It seems pretty objective to me that it makes sense for a quadra-millionaire to have collision insurance on his $100,000 Mercedes that he paid cash for. Maybe someone should create a poll on this thread to see how many quadra-millionaires are on this forum and see how many of them have collision insurance on their cars.

WoW2012
Posts: 578
Joined: Sun Dec 23, 2012 11:28 am

Re: Long-Term Care Decision

Post by WoW2012 » Tue Aug 13, 2019 2:11 pm

bearwithbear wrote:
Tue Aug 13, 2019 1:50 pm
Cognovimus,

Stop it.
Stop worrying that every bad possibility will happen (did I miss World War Z)
4 million and social security more than makes this work.
Self fund long term care.
Done.

Bear

ps. I have this conversation with my self on a too regular basis. Not that the numbers change, just a little hard wired to worry.
Getting better about it. Keep being reminded on this site that you only live once. So live.

Or, he could sacrifice 15 basis points from his portfolio each year to buy $1.5M of long-term care insurance benefits.

User avatar
TomatoTomahto
Posts: 9247
Joined: Mon Apr 11, 2011 1:48 pm

Re: Long-Term Care Decision

Post by TomatoTomahto » Tue Aug 13, 2019 2:20 pm

Maybe someone should create a poll on this thread to see how many quadra-millionaires are on this forum and see how many of them have collision insurance on their cars.
One here. A difference between having collision insurance on the car is that I’d have to make a choice not to have it on a vehicle that I’m obliged to insure by state law. I could go out of my way to decline collision, but that doesn’t save very much, so I just have a high deductible and worry about other things.

OTOH, to get LTCi, I’d have to deal with an insurance salesman, and that’s a bridge too far. I’ve had an insurance guy for years who provides homeowners, auto, and umbrella. He knows me well enough to not discuss LTCi, which I don’t think he sells.
Okay, I get it; I won't be political or controversial. The Earth is flat.

WoW2012
Posts: 578
Joined: Sun Dec 23, 2012 11:28 am

Re: Long-Term Care Decision

Post by WoW2012 » Tue Aug 13, 2019 2:21 pm

stan1 wrote:
Sun Aug 11, 2019 1:36 pm
Let's be careful not to compare policies written 20 or 30 years ago with what one can buy today. I have several older relatives who bought LTCI policies in the 1990s that were set up such that they were "paid in full" after 10 years of payments or even a single up front cash payment like an SPIA. The actuaries made a huge mistake in part by assuming 8-10%+ returns on investment. If you bought one at the time consider yourself very fortunate but don't assume the same good deal is still available. It is not.
10 year pay policies and single-premium pay policies are available today with either traditional long-term care insurance or hybrids.

cognovimus
Posts: 66
Joined: Sat Aug 10, 2019 1:07 pm

Re: Long-Term Care Decision

Post by cognovimus » Tue Aug 13, 2019 2:29 pm

WoW2012 wrote:
Tue Aug 13, 2019 2:11 pm
bearwithbear wrote:
Tue Aug 13, 2019 1:50 pm
Cognovimus,

Stop it.
Stop worrying that every bad possibility will happen (did I miss World War Z)
4 million and social security more than makes this work.
Self fund long term care.
Done.

Bear

ps. I have this conversation with my self on a too regular basis. Not that the numbers change, just a little hard wired to worry.
Getting better about it. Keep being reminded on this site that you only live once. So live.

Or, he could sacrifice 15 basis points from his portfolio each year to buy $1.5M of long-term care insurance benefits.
Ok, I'm new here. Bear's advice I is crystal clear. But WOW, are you being facetious? Because none of the options I'm considering would give me that coverage amount. Anyway, I'm going to rerun my numbers with NO LTC expense. Maybe that will help.

User avatar
TomatoTomahto
Posts: 9247
Joined: Mon Apr 11, 2011 1:48 pm

Re: Long-Term Care Decision

Post by TomatoTomahto » Tue Aug 13, 2019 3:30 pm

cognovimus wrote:
Tue Aug 13, 2019 2:29 pm
Ok, I'm new here. Bear's advice I is crystal clear. But WOW, are you being facetious? Because none of the options I'm considering would give me that coverage amount. Anyway, I'm going to rerun my numbers with NO LTC expense. Maybe that will help.
Cognovimus, you are new here. Wow is not. He posts, extensively and chronically, on one topic only: LTCi. After much discussion, he finally acknowledged that it's his profession. Many of us know better than to encourage him, but it's sometimes tempting.

Good luck.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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