It is to ntended to be worst case, hence quite unlikely to occur.TN_Boy wrote: ↑Sun Jan 26, 2020 1:31 pm
Hmm, well I think 30 years of both spouses in skilled nursing is a way out there kinda worse case if you are serious. (I think I owe wrongfunds a sort of apology ...)
From a financial planning standpoint, the good news is that you would be deducting all those expenses, and your taxes would probably be about zero.
Also from a planning standpoint, if you are going to worry about 30 years skilled nursing, you should buy the best LTCi policy you can, to cover some of those costs. I mean, why not? It reduces some of the tail risk of a long stay, and the potential pressure on a portfolio.
From a "what should you worry about financially" standpoint, I'd argue if you are going that far out on the LTC front, there are other more likely things to consider first.
For one thing, I'd buy the safest large vehicle I liked -- an auto accident being one way both spouses could wind up with long term care needs (starting at the same time even).
I'd also do things like pay for extra lightning protection, because I truly think it is much more likely your house takes a direct hit than you both need 30 years of skilled nursing.
My point, and it's a serious one, is that if you are going to put something as unlikely as needing to pay for 30 years of skilled nursing -- for both spouses! -- into a plan, it would make sense to look at more likely serious problems and try to mitigate those. I gave two examples of what I'd allocate money for as examples.
LTC insurance at least might make sense if you could not afford to pay for the facility. The market has been troubled with huge price increases and companies leaving the market. :it is unclear just what the coverage is worth. Does not make sense to buy it if you can cover the cost without it.
We drive extremely safe cars. Slowly and carefully. Don't drink, so always cold sober. Avoid driving later in the evening when there are a lot of drunks in the road.
What does that or lightning protection have to with financial planning? They are not mutually exclusive. One can drive safely as well as plan for bad financial times.
I would have thought there would be more push back against the 1% real assumption. I hope things go better but plan for bad times. Although I plan for worst case for expenses, I don't include a worst case for markets and the economy. That is because don't know what figures to use. At 1% real there is still a positive return. Thirty years of negative real returns may be unusual in modern US history but it has happened to other countries. So how bad do I make the returns? How high do I make inflation? With no good guidelines for those questions, I make my bad outcomes on the expense side, for which I can develop some figures.
When we die our remaining assets, if any, will go to our heirs. No goal of spending all our money during life. Given the uncertainties of future market returns and expenses, having a median financial future that goes to zero at death means having a 50% chance of going broke in life. I cannot make the risk of ending up poor zero but I can certainly try to make it far less than 50%.