Long-Term Care Decision

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WoW2012
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Re: Long-Term Care Decision

Post by WoW2012 » Thu Aug 15, 2019 11:04 pm

cognovimus wrote:
Thu Aug 15, 2019 12:39 pm


WOW, I'm still interested in the names of insurers that offer this. The traditional LTC quotes I have received (Transamerica, Mutual of Omaha) didn't offer 5/5 plus another 5 years of coverage and the coverage doesn't equal even today's SN cost in my state. (I know many people don't end up needing that, but it seems pointless to get a policy that doesn't even cover today's costs).

You mentioned that you will be "co-insuring" so it sounds like your policy wouldn't cover all the care either. See, I'm not enthused about paying up front and then still having to pay when I get on claim. To me, part of the value of getting LTC insurance would be the opportunity to get it and forget it.

You mentioned ditching the inflation protection; that would leave me with only $180/day in benefits which is clearly too little. Others I've spoken with said LTC is worthless without inflation protection. Obviously there are many conflicting opinions.

Finally, a lot of the quotes I have are for hybrid policies. Can you tell me the difference between "fake hybrids" and "true hybirds'?


Thank you!

If a moderator gives me permission to share the name of the insurer, I will do that.

80% of the people who need long-term care, receive their care AT HOME, not in a facility.
Don't buy a policy based upon the cost of facility care. Base it on the cost of 8 to 12 hours of home care per day (or the cost of a live-in home health aide which is about equal to 8 hours of home care). (Silk McCue can correct me if I'm wrong on that point).

Keep in mind that many expenses you have now, you would not have if you need long-term care. You probably won't be going away on vacation. You won't be golfing or skiing or horseback riding or boating (or whatever other hobby you have). A lot of your discretionary income can be re-allocated toward the cost of your care and combined with your policy, will minimize the amount of assets you have to liquidate.

Here's the #1 reason, though, that you should own some long-term care insurance.

When you need care, your wife and children will not have to decide who's going to take care of you (because they don't want to have to liquidate any of your retirement savings). They'll say, "Get out the LTCi policy and start the claims process." Buying a policy on yourself is one of the best gifts you can give your spouse and kids.

When my mother-in-law's health turned south a couple of years ago, there was no bickering between her 3 kids about what to do. She'd paid her premiums and now it was time to collect. She's already received 3x in benefits what she paid in premiums and she still has over $200,000 of benefits left in her policy. In addition to having no stress between the adult children, they also saved over $100,000 in capital gains taxes by not having to sell off her rental properties to pay for her care.

WoW2012
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Re: Long-Term Care Decision

Post by WoW2012 » Thu Aug 15, 2019 11:10 pm

ChrisC wrote:
Thu Aug 15, 2019 1:23 pm
willthrill81 wrote:
Thu Aug 15, 2019 10:25 am
2a. Could it objectively (i.e. not emotionally) make financial sense for a retiree or retired couple to purchase LTCi when they can self-insure and, if so, why?
As I've said, at least twice in this thread, it might make financial sense (aside from emotional or logistical reasons) for some (like me, a retired couple) to purchase LTCi, when they can self-insure, as ths decision is fact specific and driven by the particular contours of the LTCi policy one might have procured. Moreover, the idea that one can (or should) divorce these decisions from emotional senses of security or risk adversity is simply baffling for me -- why ignore this aspect of the decision making process unless complete irrationality has infected the decision?

In my case, I've had my policy for 16 years, and it appears to work well for me, with premium payments that have increased twice, and with reasonable assurances that my policy sponsored by Federal Government for employees and retirees will deliver policy benefits if I make claim under the policy. If LTCi policy premiums increase at an exponential level, such that the leverage of risk makes little financial sense, I'll drop the LTCi insurance and self-insure, much like the fact that I've dropped term insurance when the level of premiums have increased exponentially after a guaranteed period of level term policy premiums.
+1

WoW2012
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Re: Long-Term Care Decision

Post by WoW2012 » Thu Aug 15, 2019 11:20 pm

adamthesmythe wrote:
Thu Aug 15, 2019 3:47 pm

1. Half is the worst case, since it is very unlikely that anyone will stay in LTC long enough to use up half the assets.

2. If you have 1.5M in assets, SS is a fraction of the total income. The other part is reduced less in your scenario.

3. It is entirely reasonable for one partner to contemplate having to "manage" half the income and assets, in what is, after all, very much a worst case.

4. You assume Mr. earned more than Mrs. A bit sexist.
1. No, ALL (except what Medicaid allows) is the worst case.
2. What are you talking about? $1.5M, earning 5%, generates only $75,000 of income. $35,000 of social security income for each spouse is not unreasonable. The social security incomes make up 50% of this hypothetical couples' income.
3. Incurring $500,000 of LTC expenses is "very much a worst case"? You need to spend some time at your local nursing home. I had one relative go through that much in about 5 years TWENTY years ago!
4. You got me on this point. I'm officially disqualified.

WoW2012
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Re: Long-Term Care Decision

Post by WoW2012 » Thu Aug 15, 2019 11:24 pm

willthrill81 wrote:
Thu Aug 15, 2019 4:18 pm


Yes, but pricing, terms, and uncertainties (including with the LTC policies themselves) are what this whole issue is all about, isn't it? I fail to see how the attractiveness of policies that are no longer available today at anywhere close to their original premiums is relevant to today's decision making.

Would you prefer the old, cheaper, LTCi policies that had lots of rate increases?
Or would you prefer the new, expensive LTCi policies that are price stable?

WoW2012
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Re: Long-Term Care Decision

Post by WoW2012 » Thu Aug 15, 2019 11:27 pm

Ben Mathew wrote:
Thu Aug 15, 2019 2:34 pm

It can make sense in certain situations for people who are wealthy enough to self-insure to purchase insurance. It comes down to risk tolerance and the amount by which the premium exceeds actuarially fair amount. If a wealthy person is sufficiently risk averse, and the premium is not too much above actuarially fair, it would not be irrational for that person to purchase insurance. It's simply a matter of preference.

However there is one subset of wealthy people who clearly shouldn't buy LTC: As TomatoTomahto said in one of the LTC threads (maybe it's this one, but I haven't checked), if you plan to live large in retirement, LTC expenses might actually be cheaper than your regular discretionary expenses. People with that that level of consumption in retirement should not purchase LTC insurance. It will probably take a good bit of travel, vacation homes, luxury cars, etc. to get discretionary retirement consumption to exceed LTC expenses (say $100K to $150K per year per person, or $200K to $300K per couple). People in that boat will save money once they require LTC. Unless maybe if they plan to get concierge LTC care--round the clock shift of nurses at home and so on. But LTC insurance doesn't cover that sort of care anyway.
+1

Excellent points.

WoW2012
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Re: Long-Term Care Decision

Post by WoW2012 » Thu Aug 15, 2019 11:33 pm

smitcat wrote:
Thu Aug 15, 2019 4:21 pm

:thumbsup

If we had a working crystal ball, the decision as to whether to buy insurance of any kind would be far easier. But we don't and never will.

Much of this issue can be simplified with a fairly straightforward question: to what extent are you willing to rely on Medicaid as a backup plan to funding your LTC? Those who are willing will have a lesser need to find alternative means of funding LTC than those who are not. And the facilities available in your area may impact this as well. In some areas, facilities that will accept Medicaid right from the start may not provide care that you find acceptable and/or might not be available when you need LTC. In other areas, this is not the case.
"Much of this issue can be simplified with a fairly straightforward question: to what extent are you willing to rely on Medicaid as a backup plan to funding your LTC?"
Or how many of you have seen what a Medicaid bed and facility really means in your area?
Once we witnessed this up close and personal the answer was quite clearly - No, I do not put family in these beds/facilities.

"In some areas, facilities that will accept Medicaid right from the start may not provide care that you find acceptable and/or might not be available when you need LTC. In other areas, this is not the case"
IMHO - there is no way that the 'quality' of existing Medicaid beds/facilities will remain the same.
I have no doubt which way the quality and access are headed - perhaps others think there are some solutions on the horizon which will save this systems increasingly overused and underfunded future.

Planning for LTC utilizing the best cases now would not be my first or second plan - we see the patterns these services have tracked in other countries that have more historical time in these systems.
Again in my opinion - the ability to private pay will become increasingly important with the future of these systems
[/quote]

Excellent points, smitcat. I wish I could write as well as you do. Your points are spot on.

When we visited the two facilities nearest us to secure a place for my mother-in-law, the first facility said there was a 9 to 12 month waiting list. My MIL had already rented her home and she was moving up to Washington in a month, so we couldn't put her on a waiting list. When we told the facility administrator that she had a long-term care policy with a $10,000 monthly benefit she immediately changed her tune. There was no waiting list anymore. The waiting list was only for those relying on Medicaid.

The facility she's in is EXCEPTIONAL and they do NOT accept residents who rely on Medicaid. Fortunately, the nearly $400,000 she'll receive from her LTCi policy has enabled us to invest most of her income every month (because the policy is covering the full cost of the facility). The income she'll receive from her investments PLUS her rentals PLUS her SS and pensions will be enough to keep her out of Medicaid facilities for the rest of her life, even if she lives to 100. She'll get the best facility for as long as she lives and that's all that we care about. Having the policy made all the difference. If she hadn't had the policy she would have burned through all of her assets at some point.

WoW2012
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Re: Long-Term Care Decision

Post by WoW2012 » Thu Aug 15, 2019 11:35 pm

smitcat wrote:
Thu Aug 15, 2019 4:27 pm

I remember how expensive I thought that life and additional disability insurance was years back.
I never collected on the life policy or the disability - I do not at all feel like I 'lost out' at all - my wife and daughter were protected the way I wanted them to be.
That's what it's all about.
And that's why you own LTCi.

WoW2012
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Re: Long-Term Care Decision

Post by WoW2012 » Thu Aug 15, 2019 11:38 pm

MidFlorida1214 wrote:
Thu Aug 15, 2019 5:21 pm
My wife and I both have LTC insurance. We’ve had them for close to 20 years, having signed up through work. When I look at LongTermCare.gov, I see they estimate that 70% of those over 65 will need some form of LTC. Perhaps much of that can be at home and But even at home, any hired help can be expensive. They estimate that 65 % will need some sort of home based LTC for 2 years. Finally, they are estimating that 20 % may need LTC for 5 years and 37% could be in a facility for a year or more.

If one happens to be one of the unlucky 20% who needs 5 years of care, they could be in a world of hurt without a good size portfolio. Self insurance sounds good and the odds most likely are with you, but one with a modest portfolio could be giving a spouse and/or other dependents a severe haircut in income and lifestyle if they have benne using their portfolio for needed income.
+1
Right on.

WoW2012
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Re: Long-Term Care Decision

Post by WoW2012 » Fri Aug 16, 2019 12:56 am

Answers to Will's questions.


1. At what specific level of net worth and/or investment portfolio size can a retiree or retired couple adequately self-insure the risk of LTC or what specific process should they use to determine that specific level?
No offense, but it's a silly question. Most of my net worth is NOT in retirement accounts. I can afford to pay cash for a new house (more than oen) tomorrow. Does that mean I should not insure my house?


2a. Could it objectively (i.e. not emotionally) make financial sense for a retiree or retired couple to purchase LTCi when they can self-insure and, if so, why?
Yes. For the same reason they insure their home and their vehicles. It makes sense to pay a small premium to insure against a much larger potential loss.


2b. If you believe that a LTCi policy with a $1.5 million cap on lifetime benefits would be acceptable for a retired couple, then why would a retired couple who will always have at least that much net worth objectively wish to purchase LTCi?
Because they don't want to spend most of their assets on long-term care. They want to maintain the financial independence they've worked hard to achieve. They want each other to be able to maintain their current lifestyles even if one spouse needs extensive long-term care.


3. Do you agree that, apart from relatively unusual tax situations, the expected benefit of insurance to the insured is negative, and if not, why not and how could insurance companies offering such policies stay in business?
Yes, the expected benefit of all types of insurance is negative.
However, insurance is not an investment.
Insurance is a hedge against an unpredictable loss.
Long-term care insurance is not an investment, it protects my investments.


3. Are Medicaid-compliant annuities currently a potentially plausible alternative option to LTCi for certain retirees, and if not, why not?
Currently, "yes", for retirees who don't have a lot of their net worth in retirement accounts.
Will the gov't eventually crack down on these annuities? Probably. The last time I checked these annuities were not allowed in 9 states.
As the Medicaid budget grows and Baby Boomers rely on it more and more, more states are likely to crack down on "Medicaid compliant annuities".



4. Are irrevocable trusts currently a potentially plausible alternative option to LTCi for certain retirees, and if not, why not?
They are for someone who does not have a lot of their net worth in retirement accounts and for those who plan at least 5 years in advance. For those who choose to use irrevocable trusts, it makes sense to own long-term care insurance for at least five years after they move their assets into an irrevocable trust.

JoeRetire
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Re: Long-Term Care Decision

Post by JoeRetire » Fri Aug 16, 2019 6:38 am

WoW2012 wrote:
Thu Aug 15, 2019 12:03 am
willthrill81 wrote:
Tue Aug 13, 2019 6:36 pm
As TN_Boy noted, most financial professionals who don't have a vested interested in LTCi are not strong proponents of it.
Why do Vanguard financial advisors recommend long-term care insurance?
And it's not just Vanguard.

I personally know several fiduciary financial advisers who have specifically recommended LTCi to their clients, without having any vested interest.
Last edited by JoeRetire on Fri Aug 16, 2019 6:54 am, edited 1 time in total.

JoeRetire
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Re: Long-Term Care Decision

Post by JoeRetire » Fri Aug 16, 2019 6:40 am

cognovimus wrote:
Thu Aug 15, 2019 5:33 am
Insurer(s) names that provide shared care of $1.5 million for $6; coverage per day, # years, elimination period; inflation protection? As I said, the quotes I got (for shared care) were considerably more for less coverage.
Remember that your specific situation (particularly health) matters.

My LTCi premiums are significantly less than my wife's. She is pre-diabetic.

smitcat
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Re: Long-Term Care Decision

Post by smitcat » Fri Aug 16, 2019 6:41 am

willthrill81 wrote:
Thu Aug 15, 2019 4:44 pm
smitcat wrote:
Thu Aug 15, 2019 4:27 pm
willthrill81 wrote:
Thu Aug 15, 2019 4:18 pm
smitcat wrote:
Thu Aug 15, 2019 4:12 pm
willthrill81 wrote:
Thu Aug 15, 2019 2:05 pm
That's not really an explanation.
You have posted a number of times that IF you could get some of the LTCi policies that some folks hold now you would buy them - so it really is a pricing issue with the resultant value and the specific holder.
Yes, but pricing, terms, and uncertainties (including with the LTC policies themselves) are what this whole issue is all about, isn't it? I fail to see how the attractiveness of policies that are no longer available today at anywhere close to their original premiums is relevant to today's decision making.
Buying early and low and perhaps being able to write this off within a business is still relevant if the pricing rises - is it not?
Our policies were 'expensive' when we bought them - but we don't feel that way now. That and the out of pocket costs are about 65% what we pay so its not really a problem.
I remember how expensive I thought that life and additional disability insurance was years back.
I never collected on the life policy or the disability - I do not at all feel like I 'lost out' at all - my wife and daughter were protected the way I wanted them to be.
I've said several times, although perhaps not in this thread, that if you're able to take a tax deduction for LTCi premiums, this can make it significantly more attractive. Apart from a business or HSA, however, I don't believe that premiums are generally fully deductible.

Michael Kitces created a nice a chart a couple of years ago to illustrate this issue.

Image
https://www.kitces.com/blog/individual- ... insurance/

I don't understand how "buying early" is an inherent advantage apart from potentially behaviorally in that it helps you to not inflate your spending too much. If LTCi premiums are actuarially fair with regard to age, there shouldn't be an inherent benefit to the insured by buying early. Given that the data strongly suggest that the likelihood of filing a LTC claim before age 70, much less age 60, is tiny, I would personally have zero interest in buying an actuarially fair policy at age 55, for instance, just to 'lock in' a low premium that may still go up; the opportunity costs involved don't seem worth it to me.

In nearly 19 years of marriage, my DW and I have only filed one relatively small insurance claim, yet I don't begrudge paying premiums at all because it did (and still does) serve its purpose well: it protects us from the risk of severe financial hardship.
We do not share the potential needs and results of early long term care requirements - no problem , everyone has a differing view.

smitcat
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Re: Long-Term Care Decision

Post by smitcat » Fri Aug 16, 2019 6:44 am

willthrill81 wrote:
Thu Aug 15, 2019 4:57 pm
smitcat wrote:
Thu Aug 15, 2019 4:21 pm
willthrill81 wrote:
Thu Aug 15, 2019 2:28 pm
fposte wrote:
Thu Aug 15, 2019 12:40 pm
Ben Mathew wrote:
Thu Aug 15, 2019 11:45 am
If somebody gave you an extra $1 million for your retirement, would you spend more in retirement or would it have no effect at all? Conversely, if somebody stole $1 million from your retirement funds, would you spend less in retirement or would it have no effect at all?
You're talking about unplanned events. I'm talking about planned events.
:thumbsup

If we had a working crystal ball, the decision as to whether to buy insurance of any kind would be far easier. But we don't and never will.

Much of this issue can be simplified with a fairly straightforward question: to what extent are you willing to rely on Medicaid as a backup plan to funding your LTC? Those who are willing will have a lesser need to find alternative means of funding LTC than those who are not. And the facilities available in your area may impact this as well. In some areas, facilities that will accept Medicaid right from the start may not provide care that you find acceptable and/or might not be available when you need LTC. In other areas, this is not the case.
"Much of this issue can be simplified with a fairly straightforward question: to what extent are you willing to rely on Medicaid as a backup plan to funding your LTC?"
Or how many of you have seen what a Medicaid bed and facility really means in your area?
Once we witnessed this up close and personal the answer was quite clearly - No, I do not put family in these beds/facilities.

"In some areas, facilities that will accept Medicaid right from the start may not provide care that you find acceptable and/or might not be available when you need LTC. In other areas, this is not the case"
IMHO - there is no way that the 'quality' of existing Medicaid beds/facilities will remain the same.
I have no doubt which way the quality and access are headed - perhaps others think there are some solutions on the horizon which will save this systems increasingly overused and underfunded future.

Planning for LTC utilizing the best cases now would not be my first or second plan - we see the patterns these services have tracked in other countries that have more historical time in these systems.
Again in my opinion - the ability to private pay will become increasingly important with the future of these systems
As I said, it's area specific. There are at least a couple of LTC facilities in our area whose quality is rated similarly to private-pay facilities that will accept Medicaid right from the start. And some facilities will accept private pay initially and transition patients to Medicaid after a period of time.

But regardless of the plan one makes to deal with LTC, its imperative that people do their due diligence when forming said plan and on an ongoing basis. If someone doesn't want to rely on Medicaid in any way, that will certainly impact their planning, and it may make LTCi more attractive than otherwise.
"As I said, it's area specific. There are at least a couple of LTC facilities in our area whose quality is rated similarly to private-pay facilities that will accept Medicaid right from the start. And some facilities will accept private pay initially and transition patients to Medicaid after a period of time.

We do not share the likely future of Medicaid , quality and LTC - the pricing pressure of all medical costs and insurance along with the resultant pressure from the fairly new ACA will undoubtable test the quality within a short period of time.
YMMV

cognovimus
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Re: Long-Term Care Decision

Post by cognovimus » Fri Aug 16, 2019 6:44 am

WoW2012 wrote:
Thu Aug 15, 2019 11:04 pm
cognovimus wrote:
Thu Aug 15, 2019 12:39 pm


WOW, I'm still interested in the names of insurers that offer this. The traditional LTC quotes I have received (Transamerica, Mutual of Omaha) didn't offer 5/5 plus another 5 years of coverage and the coverage doesn't equal even today's SN cost in my state. (I know many people don't end up needing that, but it seems pointless to get a policy that doesn't even cover today's costs).

You mentioned that you will be "co-insuring" so it sounds like your policy wouldn't cover all the care either. See, I'm not enthused about paying up front and then still having to pay when I get on claim. To me, part of the value of getting LTC insurance would be the opportunity to get it and forget it.

You mentioned ditching the inflation protection; that would leave me with only $180/day in benefits which is clearly too little. Others I've spoken with said LTC is worthless without inflation protection. Obviously there are many conflicting opinions.

Finally, a lot of the quotes I have are for hybrid policies. Can you tell me the difference between "fake hybrids" and "true hybirds'?


Thank you!

If a moderator gives me permission to share the name of the insurer, I will do that.

I understand. People do mention the name of investment companies and specific funds all the time so I considered it analogous as long as you are not soliciting my business. But I'm new here, so I'm not sure how the rules are to be interpreted.


80% of the people who need long-term care, receive their care AT HOME, not in a facility.
Don't buy a policy based upon the cost of facility care. Base it on the cost of 8 to 12 hours of home care per day (or the cost of a live-in home health aide which is about equal to 8 hours of home care). (Silk McCue can correct me if I'm wrong on that point).


Keep in mind that many expenses you have now, you would not have if you need long-term care. You probably won't be going away on vacation. You won't be golfing or skiing or horseback riding or boating (or whatever other hobby you have). A lot of your discretionary income can be re-allocated toward the cost of your care and combined with your policy, will minimize the amount of assets you have to liquidate.

Agreed, though my spouse may still have some of these, particularly if I'm in an institution for a while.

Here's the #1 reason, though, that you should own some long-term care insurance.

When you need care, your wife and children will not have to decide who's going to take care of you (because they don't want to have to liquidate any of your retirement savings). They'll say, "Get out the LTCi policy and start the claims process." Buying a policy on yourself is one of the best gifts you can give your spouse and kids.

This is one of my considerations, providing an easy path for all, like a prepaid funeral. Plus less chance of putting anyone in the position of having a conflict of interest.

When my mother-in-law's health turned south a couple of years ago, there was no bickering between her 3 kids about what to do. She'd paid her premiums and now it was time to collect. She's already received 3x in benefits what she paid in premiums and she still has over $200,000 of benefits left in her policy. In addition to having no stress between the adult children, they also saved over $100,000 in capital gains taxes by not having to sell off her rental properties to pay for her care.

Sounds like she had a good policy, but those I'm being offered would not pay even assisted living costs today, so we wouldn't be getting the benefit of buying the policy and not having to address where the funding is coming from. They would pay for the approximate cost of a daily 9-hour shift home health care aide in my area today, before inflation.


JoeRetire
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Re: Long-Term Care Decision

Post by JoeRetire » Fri Aug 16, 2019 6:48 am

WoW2012 wrote:
Thu Aug 15, 2019 12:35 pm
Most policies sold under the Rate Stability Regulation have had no rate increases.
That's certainly the case for my 5-year old policy. No increases so far.

cognovimus
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Re: Long-Term Care Decision

Post by cognovimus » Fri Aug 16, 2019 6:50 am

JoeRetire wrote:
Fri Aug 16, 2019 6:40 am
cognovimus wrote:
Thu Aug 15, 2019 5:33 am
Insurer(s) names that provide shared care of $1.5 million for $6; coverage per day, # years, elimination period; inflation protection? As I said, the quotes I got (for shared care) were considerably more for less coverage.
Remember that your specific situation (particularly health) matters.

My LTCi premiums are significantly less than my wife's. She is pre-diabetic.
We haven't actually gotten to the health questions. They all seem to quote for the "second" best health category to start (they say hardly anyone meets the standard for best, maybe the people who started paying at age 50?). But in general, women are more apt to need care and that's a factor too.

JoeRetire
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Re: Long-Term Care Decision

Post by JoeRetire » Fri Aug 16, 2019 6:57 am

cognovimus wrote:
Fri Aug 16, 2019 6:50 am
JoeRetire wrote:
Fri Aug 16, 2019 6:40 am
cognovimus wrote:
Thu Aug 15, 2019 5:33 am
Insurer(s) names that provide shared care of $1.5 million for $6; coverage per day, # years, elimination period; inflation protection? As I said, the quotes I got (for shared care) were considerably more for less coverage.
Remember that your specific situation (particularly health) matters.

My LTCi premiums are significantly less than my wife's. She is pre-diabetic.
We haven't actually gotten to the health questions. They all seem to quote for the "second" best health category to start (they say hardly anyone meets the standard for best, maybe the people who started paying at age 50?). But in general, women are more apt to need care and that's a factor too.
Yup. We got the pre-conditions-check quote and the premiums for my wife and I were similar.
After the health check we found the health category she was put in made her premiums much higher.

Still worth purchasing the insurance, at least for us.

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Ben Mathew
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Re: Long-Term Care Decision

Post by Ben Mathew » Fri Aug 16, 2019 7:07 am

willthrill81 wrote:
Thu Aug 15, 2019 4:44 pm
I don't understand how "buying early" is an inherent advantage apart from potentially behaviorally in that it helps you to not inflate your spending too much. If LTCi premiums are actuarially fair with regard to age, there shouldn't be an inherent benefit to the insured by buying early. Given that the data strongly suggest that the likelihood of filing a LTC claim before age 70, much less age 60, is tiny, I would personally have zero interest in buying an actuarially fair policy at age 55, for instance, just to 'lock in' a low premium that may still go up; the opportunity costs involved don't seem worth it to me.
The risk of buying the policy late is that you might develop some health problems that make your premiums skyrocket or makes you uninsurable. If you are being offered actuarially fair rates at all ages, it would be better to buy the policy earlier rather than later. The risk of price increases after you have bought a policy is less than the risk of price increases if you haven't bought a policy because if you haven't bought a policy, your health status is also in play.

HereToLearn
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Re: Long-Term Care Decision

Post by HereToLearn » Fri Aug 16, 2019 9:01 am

WoW2012 wrote:
Thu Aug 15, 2019 11:04 pm
cognovimus wrote:
Thu Aug 15, 2019 12:39 pm


WOW, I'm still interested in the names of insurers that offer this. The traditional LTC quotes I have received (Transamerica, Mutual of Omaha) didn't offer 5/5 plus another 5 years of coverage and the coverage doesn't equal even today's SN cost in my state. (I know many people don't end up needing that, but it seems pointless to get a policy that doesn't even cover today's costs).

You mentioned that you will be "co-insuring" so it sounds like your policy wouldn't cover all the care either. See, I'm not enthused about paying up front and then still having to pay when I get on claim. To me, part of the value of getting LTC insurance would be the opportunity to get it and forget it.

You mentioned ditching the inflation protection; that would leave me with only $180/day in benefits which is clearly too little. Others I've spoken with said LTC is worthless without inflation protection. Obviously there are many conflicting opinions.

Finally, a lot of the quotes I have are for hybrid policies. Can you tell me the difference between "fake hybrids" and "true hybirds'?


Thank you!

If a moderator gives me permission to share the name of the insurer, I will do that.

80% of the people who need long-term care, receive their care AT HOME, not in a facility.
Don't buy a policy based upon the cost of facility care. Base it on the cost of 8 to 12 hours of home care per day (or the cost of a live-in home health aide which is about equal to 8 hours of home care). (Silk McCue can correct me if I'm wrong on that point).

Keep in mind that many expenses you have now, you would not have if you need long-term care. You probably won't be going away on vacation. You won't be golfing or skiing or horseback riding or boating (or whatever other hobby you have). A lot of your discretionary income can be re-allocated toward the cost of your care and combined with your policy, will minimize the amount of assets you have to liquidate.

Here's the #1 reason, though, that you should own some long-term care insurance.

When you need care, your wife and children will not have to decide who's going to take care of you (because they don't want to have to liquidate any of your retirement savings). They'll say, "Get out the LTCi policy and start the claims process." Buying a policy on yourself is one of the best gifts you can give your spouse and kids.

When my mother-in-law's health turned south a couple of years ago, there was no bickering between her 3 kids about what to do. She'd paid her premiums and now it was time to collect. She's already received 3x in benefits what she paid in premiums and she still has over $200,000 of benefits left in her policy. In addition to having no stress between the adult children, they also saved over $100,000 in capital gains taxes by not having to sell off her rental properties to pay for her care.
Re: The cost of in-home aide equalling eight hours of care. Somewhere between the time my father needed in-home care in 2009 & my my mother needed in-home care in 2018, aides who lived in the house 24 hours/day were deemed 'illegal' in New York. Your cost ratio is correct, at least as I remember it. I think we paid approximately $200/day to the aide who stayed in the house around the clock back in 2009. Today, aides can only work for an hourly pay of $26-$27/hour, in the NY metro area. Additional Worker's Compensation and Disability & Paid Family Leave rules kick in if one person works more than 40 hours/week and/or lives in, but an agency would have handled those issues. (I was handling tax & payroll because I was hiring each of the aides independently, but that isn't a task I would recommend to anyone.)

So, the true cost of 24 hour in-home care in downstate NY was $648/day. My mother's very generous benefit of $421/day still left an unreimbursed expense of $6800/month. 24 hour in-home care was not sustainable, and she would have moved to AL if she had not died. AL would only have run $8000 or so per month, although additional costs would have been incurred to privately hire transport to medical appointments.

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willthrill81
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Re: Long-Term Care Decision

Post by willthrill81 » Fri Aug 16, 2019 10:19 am

WoW2012 wrote:
Fri Aug 16, 2019 12:56 am
1. At what specific level of net worth and/or investment portfolio size can a retiree or retired couple adequately self-insure the risk of LTC or what specific process should they use to determine that specific level?
No offense, but it's a silly question. Most of my net worth is NOT in retirement accounts. I can afford to pay cash for a new house (more than oen) tomorrow. Does that mean I should not insure my house?


2a. Could it objectively (i.e. not emotionally) make financial sense for a retiree or retired couple to purchase LTCi when they can self-insure and, if so, why?
Yes. For the same reason they insure their home and their vehicles. It makes sense to pay a small premium to insure against a much larger potential loss.


2b. If you believe that a LTCi policy with a $1.5 million cap on lifetime benefits would be acceptable for a retired couple, then why would a retired couple who will always have at least that much net worth objectively wish to purchase LTCi?
Because they don't want to spend most of their assets on long-term care. They want to maintain the financial independence they've worked hard to achieve. They want each other to be able to maintain their current lifestyles even if one spouse needs extensive long-term care.


3. Do you agree that, apart from relatively unusual tax situations, the expected benefit of insurance to the insured is negative, and if not, why not and how could insurance companies offering such policies stay in business?
Yes, the expected benefit of all types of insurance is negative.
However, insurance is not an investment.
Insurance is a hedge against an unpredictable loss.
Long-term care insurance is not an investment, it protects my investments.


3. Are Medicaid-compliant annuities currently a potentially plausible alternative option to LTCi for certain retirees, and if not, why not?
Currently, "yes", for retirees who don't have a lot of their net worth in retirement accounts.
Will the gov't eventually crack down on these annuities? Probably. The last time I checked these annuities were not allowed in 9 states.
As the Medicaid budget grows and Baby Boomers rely on it more and more, more states are likely to crack down on "Medicaid compliant annuities".



4. Are irrevocable trusts currently a potentially plausible alternative option to LTCi for certain retirees, and if not, why not?
They are for someone who does not have a lot of their net worth in retirement accounts and for those who plan at least 5 years in advance. For those who choose to use irrevocable trusts, it makes sense to own long-term care insurance for at least five years after they move their assets into an irrevocable trust.
Thank you for your answers.

With regard to #1, I don't believe that it's a silly question at all. It's a cost/benefit issue. And not every risk that can be insured should be.
“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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willthrill81
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Re: Long-Term Care Decision

Post by willthrill81 » Fri Aug 16, 2019 10:21 am

Ben Mathew wrote:
Fri Aug 16, 2019 7:07 am
willthrill81 wrote:
Thu Aug 15, 2019 4:44 pm
I don't understand how "buying early" is an inherent advantage apart from potentially behaviorally in that it helps you to not inflate your spending too much. If LTCi premiums are actuarially fair with regard to age, there shouldn't be an inherent benefit to the insured by buying early. Given that the data strongly suggest that the likelihood of filing a LTC claim before age 70, much less age 60, is tiny, I would personally have zero interest in buying an actuarially fair policy at age 55, for instance, just to 'lock in' a low premium that may still go up; the opportunity costs involved don't seem worth it to me.
The risk of buying the policy late is that you might develop some health problems that make your premiums skyrocket or makes you uninsurable. If you are being offered actuarially fair rates at all ages, it would be better to buy the policy earlier rather than later. The risk of price increases after you have bought a policy is less than the risk of price increases if you haven't bought a policy because if you haven't bought a policy, your health status is also in play.
That's a fair point.
“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

pintail07
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Re: Long-Term Care Decision

Post by pintail07 » Fri Aug 16, 2019 12:49 pm


TN_Boy
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Re: Long-Term Care Decision

Post by TN_Boy » Sat Aug 17, 2019 9:16 am

WoW2012 wrote:
Wed Aug 14, 2019 11:40 pm
TN_Boy wrote:
Tue Aug 13, 2019 4:51 pm
pintail07 wrote:
Tue Aug 13, 2019 4:35 pm
The question is not if it is taught in "sales tactics 101', but was the statement true or false. Totally true IMO.
Walk me through the dollar amount. 15 basis points on 4m .... that's $6,000? So for $6,000 a year you can get 1.5 million in LTC insurance? Is that for a couple or an individual?

So twenty years of LTC insurance is $120,000, not counting the opportunity cost of that money being spent, not invested.

15 basis points sounds trivial. $120,000 sounds less trivial.
That $6,000 a year premium covers both spouses.

If $120,000 sounds like a lot of money to someone, do they think the actual long-term care expenses they and their spouse incur will be less than that?

If writing a check for $6,000 per year is hard, how hard would it be to write a check for $72,000 per year?
Well, if I paid 120k over twenty years and then wrote two checks for 72k I'd feel okay.

My problem with the basis points is that I think it is a backwards way of doing the cost analysis. First you figure out how much something costs. THEN you look at the monthly or yearly expense to pay for it.

It's a standard thing at car dealerships, right? "We can put you in this car for $300 a month." Because they don't want you to realize the total cost of buying the car with a 60 month loan (for example). Or, when I buy a house, I look FIRST at how much it costs, second at what the mortgage payment will be.

So I think people should look at LTC insurance the same way. They will probably pay decades of premiums (because I agree that if you want LTC insurance, you should buy it at 60ish ..) and that total cost for serious coverage will be solidly into six figures. Then you decide how you feel about the yearly premium.

For example, suppose I planned on spending 100k a year. 6k is affordable. But that cost is equivalent to a major home repair, a moderately expensive vacation, etc. every single year.

And then you realize that most likely, if you need LTC, you and/or your spouse will be in facility for a year or two before you get that money back. Or maybe disaster strikes and you are in a facility for a long time. But that's very unlikely.

But while you cannot predict your future LTC requirements, you can make a clear-headed analysis of how much over time buying that insurance will cost you, and arguments that obscure the total cost are misleading.

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willthrill81
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Re: Long-Term Care Decision

Post by willthrill81 » Sat Aug 17, 2019 10:52 am

TN_Boy wrote:
Sat Aug 17, 2019 9:16 am
WoW2012 wrote:
Wed Aug 14, 2019 11:40 pm
TN_Boy wrote:
Tue Aug 13, 2019 4:51 pm
pintail07 wrote:
Tue Aug 13, 2019 4:35 pm
The question is not if it is taught in "sales tactics 101', but was the statement true or false. Totally true IMO.
Walk me through the dollar amount. 15 basis points on 4m .... that's $6,000? So for $6,000 a year you can get 1.5 million in LTC insurance? Is that for a couple or an individual?

So twenty years of LTC insurance is $120,000, not counting the opportunity cost of that money being spent, not invested.

15 basis points sounds trivial. $120,000 sounds less trivial.
That $6,000 a year premium covers both spouses.

If $120,000 sounds like a lot of money to someone, do they think the actual long-term care expenses they and their spouse incur will be less than that?

If writing a check for $6,000 per year is hard, how hard would it be to write a check for $72,000 per year?
Well, if I paid 120k over twenty years and then wrote two checks for 72k I'd feel okay.

My problem with the basis points is that I think it is a backwards way of doing the cost analysis. First you figure out how much something costs. THEN you look at the monthly or yearly expense to pay for it.

It's a standard thing at car dealerships, right? "We can put you in this car for $300 a month." Because they don't want you to realize the total cost of buying the car with a 60 month loan (for example). Or, when I buy a house, I look FIRST at how much it costs, second at what the mortgage payment will be.

So I think people should look at LTC insurance the same way. They will probably pay decades of premiums (because I agree that if you want LTC insurance, you should buy it at 60ish ..) and that total cost for serious coverage will be solidly into six figures. Then you decide how you feel about the yearly premium.

For example, suppose I planned on spending 100k a year. 6k is affordable. But that cost is equivalent to a major home repair, a moderately expensive vacation, etc. every single year.

And then you realize that most likely, if you need LTC, you and/or your spouse will be in facility for a year or two before you get that money back. Or maybe disaster strikes and you are in a facility for a long time. But that's very unlikely.

But while you cannot predict your future LTC requirements, you can make a clear-headed analysis of how much over time buying that insurance will cost you, and arguments that obscure the total cost are misleading.
Very well said.
“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 Silk McCue » Sat Aug 17, 2019 10:53 am

TN_Boy wrote:
Sat Aug 17, 2019 9:16 am
But while you cannot predict your future LTC requirements, you can make a clear-headed analysis of how much over time buying that insurance will cost you, and arguments that obscure the total cost are misleading.
It isn’t misleading at all unless you want to see it that way. It doesn’t obscure the total cost for anyone that can read, comprehend and do simple math.

Bogleheads can handle this as a part of all the various analyses we perform when planning our financial future based upon the knowledge shared on this site.

Cheers

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Re: Long-Term Care Decision

Post by Jackson12 » Sat Aug 17, 2019 12:23 pm

pintail07 wrote:
Fri Aug 16, 2019 12:49 pm
https://www.thinkadvisor.com/2019/08/15 ... 0716134615

This is disturbing news.
On the same page this info appears: :

. Markopolos himself says he has a strong financial incentive to be hard on GE.This doesn’t mean that his analysis of GE is incorrect but when one’s financial interests and profits are involved, I believe the potential for bias is higher.

Members of the public who want to see his report first have to acknowledge that they have read his disclosures.

Markopolos says in the disclosures that members of his company, Forensic Decisions PR LLC, personally have “securities, derivatives, and/or other financial instruments” that will generate a profit if the price of GE’s stock falls.

Here’s part of the text of the disclosures:

Prior to the initial distribution of this Report on August 15, 2019, the Company entered into an agreement with a third-party entity to review an advanced copy of the Report in exchange for later-provided compensation. That compensation is based on a percentage of the profits resulting from the third-party entity’s positions in the securities, derivatives, and other financial instruments of, and/or relating to, General Electric Company (“GE”) (NYSE: GE). Those positions taken by the third-party entity are designed to generate profits should the price of GE securities decrease. Prior to the initial distribution of this Report on August 15, 2019, the Company also submitted this Report to the U.S. Securities and Exchange Commission’s Whistleblower Program and the U.S. Department of Justice’s FIRREA Whistleblower Program. Both or either of those submissions may generate profits for the Company independent of the financial performance of GE and/or the securities, derivatives, and other financial instruments of, and/or relating to, GE.

Lastly, members of the Company are personally in possession of securities, derivatives, and/or other financial instruments of, and/or relating to, GE, which may generate profits should the price of GE securities decrease

TN_Boy
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Re: Long-Term Care Decision

Post by TN_Boy » Sat Aug 17, 2019 2:21 pm

Silk McCue wrote:
Sat Aug 17, 2019 10:53 am
TN_Boy wrote:
Sat Aug 17, 2019 9:16 am
But while you cannot predict your future LTC requirements, you can make a clear-headed analysis of how much over time buying that insurance will cost you, and arguments that obscure the total cost are misleading.
It isn’t misleading at all unless you want to see it that way. It doesn’t obscure the total cost for anyone that can read, comprehend and do simple math.

Bogleheads can handle this as a part of all the various analyses we perform when planning our financial future based upon the knowledge shared on this site.

Cheers
I'll refrain (after this post) from further comments on the "basis points" versus dollars mix and match, but cannot resist one more set of comments.

I'll get the minor point out of the way quickly; as I noted before, basis points are specific to a particular poster's portfolio. Which is what happened in this thread; a reference to 15 basis points in a response that didn't include the portfolio size. Thus someone following along has to go back and find that information, then convert to their portfolio etc.

But that's the the minor problem. Surely when you do a cost/benefit analysis you want the best handle on both, expressed in the same units of measure?? Why wouldn't you do it that way?

When LTC costs are discussed, it is always in dollars. X/dollars per year in some type of care. And you also have total cost projections, which are more interesting. For example 15% of people will need $250k or more of LTC. Or whatever. You can look those numbers up. But they are in .... dollars.

Okay, I'm sold. I want insurance for that LTC risk. Well how much will that cost? And somebody says "15 basis points!" What a non-answer! The correct answer is "X dollars per year, multiplied by the number of years you are likely to pay that insurance." And if you do that math, you get a number, which is the cost floor (premiums might go up and there is the opportunity cost of the money not being invested).

But now you can take a stab at answering the question. Okay, it's probably going to cost a minimum of, say, $120,000 to pay for LTC insurance, and the LTC might might run from 0 to over a million dollars. But you are comparing the cost to the potential benefits. Which is sorta what cost/benefit analysis is.

And very importantly, that cost/benefit is independent of portfolio size. It doesn't matter whether you have 1M or 100M. This is what you are getting. Once you have decided you like the cost/benefit ratio, basis points might be interesting if you decide whether you can afford the insurance.

If someone has a good argument for LTC insurance, that argument should be crystal clear on the costs of that insurance.

Do note I am not saying the the LTC insurance question should be based solely upon cost/benefit analysis; among other things, we don't know our LTC needs in advance. And it strikes me as completely rational for some people to decide that they want to spend the money to cover the risk of a very long LTC stay. But you ought to be open about the total cost of that insurance.

But we all have different backgrounds. Mine is the tech sector, where we were taught to make arguments as simple as possible, even though the audience for our technical papers and presentations were .... really technical people. (I'm visualizing what the response would have been in my work world at somebody mixing yearly basis points for costs with revenues in dollars when pitching a project ... ).

pintail07
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Re: Long-Term Care Decision

Post by pintail07 » Sat Aug 17, 2019 5:58 pm

Using basis points can be very valuable in determining the major or minor impact premiums will have on total income. Recently had a client with over 3,000,000 of passive income. In his case his premium of 8000 is less than 1 basis point, irrelevant in his opinion. Potential payout of 300 per day at 3% compound inflation with lifetime benefit, current age 60, in 23 years benefit is 600 per day or 216,000 per year, If claims last 10 years payout of over 2,000,000. Basis point discussions are very helpful for some folks.

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Re: Long-Term Care Decision

Post by WoW2012 » Fri Aug 23, 2019 2:37 pm

JoeRetire wrote:
Fri Aug 16, 2019 6:38 am
WoW2012 wrote:
Thu Aug 15, 2019 12:03 am
willthrill81 wrote:
Tue Aug 13, 2019 6:36 pm
As TN_Boy noted, most financial professionals who don't have a vested interested in LTCi are not strong proponents of it.
Why do Vanguard financial advisors recommend long-term care insurance?
And it's not just Vanguard.

I personally know several fiduciary financial advisers who have specifically recommended LTCi to their clients, without having any vested interest.

+1

I work with a lot of fiduciary financial advisers. They refer some of their clients to me because they believe it's in that client's best interest to own LTCi.

WoW2012
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Re: Long-Term Care Decision

Post by WoW2012 » Fri Aug 23, 2019 2:41 pm

Ben Mathew wrote:
Fri Aug 16, 2019 7:07 am


The risk of buying the policy late is that you might develop some health problems that make your premiums skyrocket or makes you uninsurable. If you are being offered actuarially fair rates at all ages, it would be better to buy the policy earlier rather than later. The risk of price increases after you have bought a policy is less than the risk of price increases if you haven't bought a policy because if you haven't bought a policy, your health status is also in play.
Well stated.
I do this for a living and I never thought of stating it like that.
Very well done!

JoeRetire
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Re: Long-Term Care Decision

Post by JoeRetire » Tue Aug 27, 2019 6:25 am

WoW2012 wrote:
Fri Aug 23, 2019 2:37 pm
JoeRetire wrote:
Fri Aug 16, 2019 6:38 am
WoW2012 wrote:
Thu Aug 15, 2019 12:03 am
willthrill81 wrote:
Tue Aug 13, 2019 6:36 pm
As TN_Boy noted, most financial professionals who don't have a vested interested in LTCi are not strong proponents of it.
Why do Vanguard financial advisors recommend long-term care insurance?
And it's not just Vanguard.

I personally know several fiduciary financial advisers who have specifically recommended LTCi to their clients, without having any vested interest.

+1

I work with a lot of fiduciary financial advisers. They refer some of their clients to me because they believe it's in that client's best interest to own LTCi.
And certainly they believe it's in their clients' best interest to work with you specifically.

To others: if your financial adviser isn't doing this sort of thing for you, then you aren't working with a fiduciary, and may only be working with an investment adviser, rather than an actual financial adviser.

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