rustwood wrote: ↑Fri Jun 02, 2023 6:34 am
I thought this WSJ article from yesterday might be of interest to some here:
Should You Self-Insure Your Long-Term Care?
The subtitle is "Seven questions to ask yourself when considering whether to buy a policy or pay for the care out of your own pocket"
In general I agree with the points it raises but I don't understand a comment in the first question:
"Wealthier people without dependents such as a spouse or partner or children may have even more cause to think about self-insuring." I would think just the opposite - if you don't have any legacy concerns and you don't have any obvious choice for someone to manage your finances while you are receiving care, why wouldn't you just want to use your funds to secure your care through LTC insurance? Am I missing something?
Interesting. We get the WSJ at work and I was wondering why I hadn't seen this article. I finally saw it in the print edition yesterday and it reminded me of this thread. As far as the bolded part, that would probably describe me. I'm probably too young (50) to seriously consider LTCI yet, and in any case, I'm leaning strongly towards self-insuring. One of the big advantages of being single is that there's no obstacle to selling the house and using that to fund the assisted living / nursing home. And almost everything in the "expense" category (cars, utilities, property taxes, etc.) should go to zero when entering assisted living since there's no trailing spouse at home. Here's some numbers I've put together that are loosely based on my expected retirement:
Pre-nursing home:
o Annual expenses: $80k (~half fixed / half discretionary)
o $40k annual income from Social Security / small pension
o $40k/yr coming from ~$1.5MM portfolio (< 3% WR, should be close to a perpetual withdrawal rate)
Nursing home:
o Hypothetically enter NH @ 75, cost is $120k/yr (a rather nice NH in my area)
o Still getting $40k/yr from SS/pension, leaving $80k/yr shortfall to cover
o Sell house for ~$400k net ==> covers the shortfall for 5 yrs w/o having to touch portfolio
o For year 6+, pull $80k/yr from portfolio. The portfolio has probably grown over the initial 5-yr period, but assuming it hasn't, that's 5.33% WR.
o Even the worst case on Firecalc requires 15 yrs for the above to fail.
The scenario above covers 20 total years in the NH / age 95 using some fairly bad assumptions, and frankly I think my chances of even reaching that point are infinitesimal. I just don't see a typical LTCI that covers maybe 3 yrs of NH expenses moving the needle all that much on such a long stay. Maybe on a shorter stay it makes a much bigger difference, but that doesn't change much except the size of the estate my distant heirs/charities will inherit. They're welcome to whatever money remains when I pass, but I'm not going to inconvenience myself to give them more money.