WSJ Long Term Care self-insuring article

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WoW2012
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Re: WSJ Long Term Care self-insuring article

Post by WoW2012 »

LiveSimple wrote: Sat Jun 03, 2023 5:39 am
So you cannot afford to self insure if you have sell your companies or leave a huge inheritance,

Another create a fear to help sell
I think the writer of the article was trying to point out that some assets are not very liquid (e.g. investment real estate, businesses). Plus, there are tax consequences of selling highly appreciated assets. To avoid capital gains taxes, it's better to have appreciated assets inherited rather than sell them why you are alive.

They could have had one of their businesses paying the LTCi premium (pre-tax) and the LTCi benefits would have been tax-free. LTCi is tax-friendly whereas self-insuring may not be.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
WoW2012
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Re: WSJ Long Term Care self-insuring article

Post by WoW2012 »

RationalWalk wrote: Sun Jun 04, 2023 12:15 pm As Nisiprius points out, the tail risk of long term care is the elephant in the room. To address this, you need to have (a) a great deal of wealth, (b) a very large life annuity, (c) close family or friends who can manage the financial aspects of transitioning to Medicaid if you run out of money paying for care, or (d) the ability and willingness to move into a CCRC that won't kick you out if you go broke. Excluding these, almost everybody ends up relying on the good fortune to die before spending much time in the tail. Most of us will win that bet -- but a very small cohort won't.
Long-term care partnership policies solve the "tail risk" problem.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
WoW2012
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Re: WSJ Long Term Care self-insuring article

Post by WoW2012 »

RationalWalk wrote: Sun Jun 04, 2023 1:00 pm That benefit accrues to someone else and not directly to you.
Not true.
An LTCi partnership policy protects the assets of the insured AND the insured's spouse should they ever choose to (or need to) apply for Medicaid.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
WoW2012
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Re: WSJ Long Term Care self-insuring article

Post by WoW2012 »

Silk McCue wrote: Sun Jun 04, 2023 1:43 pm
RationalWalk wrote: Sun Jun 04, 2023 1:00 pm Apparently, these long term care partnership policies are essentially useful for asset protection. You can avoid spending down the amount paid out by the LTCi before qualifying for Medicaid. You'll still be dealing with Medicaid when that sum is exhausted, so it's not a Medicaid-avoidance strategy. The net benefit would consist of the amount you'll pay for LTCi premiums deducted from the amount of asset preservation. That benefit accrues to someone else and not directly to you.
That last sentence is not accurate. The protected assets can be used to supplement care provided by Medicaid and can be of benefit to the surviving spouse during their lifetime.

Cheers

Excellent point, McCue.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
WoW2012
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Re: WSJ Long Term Care self-insuring article

Post by WoW2012 »

smitcat wrote: Sun Jun 04, 2023 7:45 pm

You may also want to look at the large picture and see how it all plays out. If you had say $650K in LTCi now and needed your $100K per year as an example you would no longer need your SS during your care stay. If your SS was say $50K and you accrued that during the 6 years of LTCi payout you would have another 3 years of fees - and after that 3 years you would have another 1.5 years.
Then the 6 + 3 + 1.5 gets you out to that 10 years of care you were targeting without touching any other assets.

This is exactly what we did with my mother-in-law. When she was in the assisted-living facility, her LTCi policy basically covered all of her expenses. We invested nearly all of her income every month so that once her LTCi policy ran out we could cover the full cost of her care just using the her pensions, social security, and dividend income.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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Re: WSJ Long Term Care self-insuring article

Post by firebirdparts »

rustwood wrote: Fri Jun 02, 2023 6:34 am 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?
I agree with the article, and honestly I'm having a hard time understand what you missed. It's just too basic for me to relate.

Everybody I know, everywhere, is super interested in committing welfare fraud here. It's basically everybody I know, looking to create life estates and trusts and sell everything for a dollar "before it's too late". Why do they do this? Well, they want the kids to have it all. they don't want the nursing home paid by anybody in the family. But if you don't have children, you don't really have a reason to fake indigence. Where's the big temptation to save it all? Just spend it.

So ------ an alternative to welfare fraud is LTC insurance. The same reasoning applies.
This time is the same
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Re: WSJ Long Term Care self-insuring article

Post by Silk McCue »

firebirdparts wrote: Mon Jun 05, 2023 3:22 pm So ------ an alternative to welfare fraud is LTC insurance. The same reasoning applies.
Welfare fraud? Care to explain? Specifically have you seen welfare fraud suggestions on this thread?

Cheers
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Re: WSJ Long Term Care self-insuring article

Post by beyou »

nisiprius wrote: Fri Jun 02, 2023 8:18 am A disappointingly shallow article that sidesteps all the big questions. I don't have answers to any of them, but I don't feel that the article shed much light on them.
So in other words, it follows normal journalism standards.
Write article on hot topic to get eyeballs and sell ads/subscriptions.
Inform only the totally uninformed, who later realize its as not so informative as they had thought, after learning elsewhere.
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beyou
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Re: WSJ Long Term Care self-insuring article

Post by beyou »

The SECURE 2.0 act only serves to strengthen my plan.
Now that us younger retirees can avoid RMD until the age of 75, I plan to keep my IRA as my hybrid LTC policy.

My children will get the IRA if us parents are deceased at a younger age.
If we live to a ripe old age, this money will be spent on LTC which can be a huge tax deductible expense, greatly reducing the taxation of my t-IRA.

And since we are earning market returns in the IRA instead of paying premiums to an insurance company, the pool of money should at least keep up with inflation (in fact I have a good chunk of the IRA in TIPS, but also in riskier assets that I can rebalance with the TIPS). No need to pay an insurance firm for an inflation rider nor anything. I already have enough saved in the IRA to cover common policy limits for both my spouse and myself, and the extra costs often not covered when most policies have already fully paid out, after a lifetime of maxing out my 401k and matching.

Of course this requires one has other funds to survive during retirement and avoid the need to withdraw more than the RMDs.
But if you do not have funds to live on, then how do you pay the premiums for LTCi ? It is expensive.
The best solution to caring for yourself in old age is LBYM, max tax opportunities, minimize investing costs, or better put SAVE FOR YOUR long term future. If you simply could not, tough question if you want to give what you have to an insurance firm vs buy food and pay rent. I pref the rent and food.
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Re: WSJ Long Term Care self-insuring article

Post by sc9182 »

beyou wrote: Mon Jun 05, 2023 4:57 pm The SECURE 2.0 act only serves to strengthen my plan.
Now that us younger retirees can avoid RMD until the age of 75, I plan to keep my IRA as my hybrid LTC policy.

My children will get the IRA if us parents are deceased at a younger age.
If we live to a ripe old age, this money will be spent on LTC which can be a huge tax deductible expense, greatly reducing the taxation of my t-IRA.

And since we are earning market returns in the IRA instead of paying premiums to an insurance company, the pool of money should at least keep up with inflation (in fact I have a good chunk of the IRA in TIPS, but also in riskier assets that I can rebalance with the TIPS). No need to pay an insurance firm for an inflation rider nor anything. I already have enough saved in the IRA to cover common policy limits for both my spouse and myself, and the extra costs often not covered when most policies have already fully paid out, after a lifetime of maxing out my 401k and matching.

Of course this requires one has other funds to survive during retirement and avoid the need to withdraw more than the RMDs.
But if you do not have funds to live on, then how do you pay the premiums for LTCi ? It is expensive.
The best solution to caring for yourself in old age is LBYM, max tax opportunities, minimize investing costs, or better put SAVE FOR YOUR long term future. If you simply could not, tough question if you want to give what you have to an insurance firm vs buy food and pay rent. I pref the rent and food.
++1

In some of the above/other posters examples - indicating as if 3-5 years of LTCi should be pretty good — and save SS during those 5 years under LTCi coverage, and use the saved SS towards LTC needs and such.

It appears - LTCi only covers partial $amount (daily limit), and partial duration (cap/max years) of possible LTC need. Worse yet - most of new policies appear to have 3-6 months of no upfront coverage. In all these scenarios- you need monies, need decent chunk of monies in-fact (and need to continue to pay ever increasing premium $s). To top it off - LTCi need to qualify (medically?) to underwrite policy on you ..

Where’s the beef, guys !?

We would rather save large Trad IRA - and let it cover our LTC and or large medical needs (often tax deductible over 7% AGI). We be happy to let our un-spent/non-wasted LTCI premium moneys — to stay/keep invested in Trad IRAs - and simply allow it compound (btw- we sure welcome large RMDs at age 75; we do need monies to live, and can contemplate large QCDs if RMDs grow quite huge)
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Re: WSJ Long Term Care self-insuring article

Post by smitcat »

beyou wrote: Mon Jun 05, 2023 4:57 pm The SECURE 2.0 act only serves to strengthen my plan.
Now that us younger retirees can avoid RMD until the age of 75, I plan to keep my IRA as my hybrid LTC policy.

My children will get the IRA if us parents are deceased at a younger age.
If we live to a ripe old age, this money will be spent on LTC which can be a huge tax deductible expense, greatly reducing the taxation of my t-IRA.

And since we are earning market returns in the IRA instead of paying premiums to an insurance company, the pool of money should at least keep up with inflation (in fact I have a good chunk of the IRA in TIPS, but also in riskier assets that I can rebalance with the TIPS). No need to pay an insurance firm for an inflation rider nor anything. I already have enough saved in the IRA to cover common policy limits for both my spouse and myself, and the extra costs often not covered when most policies have already fully paid out, after a lifetime of maxing out my 401k and matching.

Of course this requires one has other funds to survive during retirement and avoid the need to withdraw more than the RMDs.
But if you do not have funds to live on, then how do you pay the premiums for LTCi ? It is expensive.
The best solution to caring for yourself in old age is LBYM, max tax opportunities, minimize investing costs, or better put SAVE FOR YOUR long term future. If you simply could not, tough question if you want to give what you have to an insurance firm vs buy food and pay rent. I pref the rent and food.
"The SECURE 2.0 act only serves to strengthen my plan."
Agreed - secure 2.0 allows one to pay LTCi without tax from IRA beginning in 2026.
This in turn allows us to invest aggressively for our heirs and/or transfer funds earlier on.
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Re: WSJ Long Term Care self-insuring article

Post by smitcat »

sc9182 wrote: Mon Jun 05, 2023 5:54 pm
beyou wrote: Mon Jun 05, 2023 4:57 pm The SECURE 2.0 act only serves to strengthen my plan.
Now that us younger retirees can avoid RMD until the age of 75, I plan to keep my IRA as my hybrid LTC policy.

My children will get the IRA if us parents are deceased at a younger age.
If we live to a ripe old age, this money will be spent on LTC which can be a huge tax deductible expense, greatly reducing the taxation of my t-IRA.

And since we are earning market returns in the IRA instead of paying premiums to an insurance company, the pool of money should at least keep up with inflation (in fact I have a good chunk of the IRA in TIPS, but also in riskier assets that I can rebalance with the TIPS). No need to pay an insurance firm for an inflation rider nor anything. I already have enough saved in the IRA to cover common policy limits for both my spouse and myself, and the extra costs often not covered when most policies have already fully paid out, after a lifetime of maxing out my 401k and matching.

Of course this requires one has other funds to survive during retirement and avoid the need to withdraw more than the RMDs.
But if you do not have funds to live on, then how do you pay the premiums for LTCi ? It is expensive.
The best solution to caring for yourself in old age is LBYM, max tax opportunities, minimize investing costs, or better put SAVE FOR YOUR long term future. If you simply could not, tough question if you want to give what you have to an insurance firm vs buy food and pay rent. I pref the rent and food.
++1

In some of the above/other posters examples - indicating as if 3-5 years of LTCi should be pretty good — and save SS during those 5 years under LTCi coverage, and use the saved SS towards LTC needs and such.

It appears - LTCi only covers partial $amount (daily limit), and partial duration (cap/max years) of possible LTC need. Worse yet - most of new policies appear to have 3-6 months of no upfront coverage. In all these scenarios- you need monies, need decent chunk of monies in-fact (and need to continue to pay ever increasing premium $s). To top it off - LTCi need to qualify (medically?) to underwrite policy on you ..

Where’s the beef, guys !?

We would rather save large Trad IRA - and let it cover our LTC and or large medical needs (often tax deductible over 7% AGI). We be happy to let our un-spent/non-wasted LTCI premium moneys — to stay/keep invested in Trad IRAs - and simply allow it compound (btw- we sure welcome large RMDs at age 75; we do need monies to live, and can contemplate large QCDs if RMDs grow quite huge)
Have you run your plan above through any calculators to review the pros and cons?
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Re: WSJ Long Term Care self-insuring article

Post by sc9182 »

smitcat wrote: Mon Jun 05, 2023 6:00 pm Have you run your plan above through any calculators to review the pros and cons?
Nothing for or against modeling tools - we are ways (possibly decades) away from needing/using those tools/modeling. We also need to consider ACA, geo-arbitration, future & kids (not just ours, but kids’ tax brackets as well) potential tax brackets, portfolio/market returns, inflation - most importantly continue to strive for further career/income growth.

Most of which (above) points are harder to model, let alone actualize/realize over multiple decades - with ever changing regulations/tax landscape. To throw wrench into planning, life can throw surprises (unexpected but possible) - disability, bad-health, D & D .. among other scenarios. Kind of hard to model those .. yes, we prepare for such “personal black-swan” events - but, hard to predict/model those ..

Anyhow - many a modeling software(s) have failed to account for ever changing (and changing at each state level) ACA (if one would consider early retire), need/utility for limited amounts of term-insurance going into RMD ages., utilizing Kid’s tax brackets into our own modeling., step-up basis assets/businesses, and/or unable to figure accumulated depreciation write-off upon demise, Trad IRAs role towards LTC needs, large deductible medical/health/vision/dental expenses planning (over 7% agi) — among other things.

Worse yet - many software prescribe (sorry to say this) aggressive Roth conversions. We love to pay taxes, but not excited to pay it upfront - considering how useful large Trad IRA could be in our case (see previous post about us not having double max-pensions, not interested in annuities).

Anyhow - by the time we consider retire/early-retire — hoping modeling software(s) will become ever more feature rich, and stop-pushing unnecessary (at-times) aggressive-Roth conversions :-)
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Re: WSJ Long Term Care self-insuring article

Post by beyou »

smitcat wrote: Mon Jun 05, 2023 6:00 pm
sc9182 wrote: Mon Jun 05, 2023 5:54 pm
beyou wrote: Mon Jun 05, 2023 4:57 pm The SECURE 2.0 act only serves to strengthen my plan.
Now that us younger retirees can avoid RMD until the age of 75, I plan to keep my IRA as my hybrid LTC policy.

My children will get the IRA if us parents are deceased at a younger age.
If we live to a ripe old age, this money will be spent on LTC which can be a huge tax deductible expense, greatly reducing the taxation of my t-IRA.

And since we are earning market returns in the IRA instead of paying premiums to an insurance company, the pool of money should at least keep up with inflation (in fact I have a good chunk of the IRA in TIPS, but also in riskier assets that I can rebalance with the TIPS). No need to pay an insurance firm for an inflation rider nor anything. I already have enough saved in the IRA to cover common policy limits for both my spouse and myself, and the extra costs often not covered when most policies have already fully paid out, after a lifetime of maxing out my 401k and matching.

Of course this requires one has other funds to survive during retirement and avoid the need to withdraw more than the RMDs.
But if you do not have funds to live on, then how do you pay the premiums for LTCi ? It is expensive.
The best solution to caring for yourself in old age is LBYM, max tax opportunities, minimize investing costs, or better put SAVE FOR YOUR long term future. If you simply could not, tough question if you want to give what you have to an insurance firm vs buy food and pay rent. I pref the rent and food.
++1

In some of the above/other posters examples - indicating as if 3-5 years of LTCi should be pretty good — and save SS during those 5 years under LTCi coverage, and use the saved SS towards LTC needs and such.

It appears - LTCi only covers partial $amount (daily limit), and partial duration (cap/max years) of possible LTC need. Worse yet - most of new policies appear to have 3-6 months of no upfront coverage. In all these scenarios- you need monies, need decent chunk of monies in-fact (and need to continue to pay ever increasing premium $s). To top it off - LTCi need to qualify (medically?) to underwrite policy on you ..

Where’s the beef, guys !?

We would rather save large Trad IRA - and let it cover our LTC and or large medical needs (often tax deductible over 7% AGI). We be happy to let our un-spent/non-wasted LTCI premium moneys — to stay/keep invested in Trad IRAs - and simply allow it compound (btw- we sure welcome large RMDs at age 75; we do need monies to live, and can contemplate large QCDs if RMDs grow quite huge)
Have you run your plan above through any calculators to review the pros and cons?
I have enough in my IRA so that if I ended up needed care I can pay with the current balance. And if I do not need care, the balance will grow.
WoW2012
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Re: WSJ Long Term Care self-insuring article

Post by WoW2012 »

sc9182 wrote: Mon Jun 05, 2023 5:54 pm (and need to continue to pay ever increasing premium $s).
Please google, "Rate Stability Regulation".
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
WoW2012
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Re: WSJ Long Term Care self-insuring article

Post by WoW2012 »

beyou wrote: Mon Jun 05, 2023 6:50 pm
I have enough in my IRA so that if I ended up needed care I can pay with the current balance. And if I do not need care, the balance will grow.
Make sure your DPOA knows your plans. Otherwise, they may decide to care for you themselves to try to save the t-IRA.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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Re: WSJ Long Term Care self-insuring article

Post by sc9182 »

WoW2012 wrote: Mon Jun 05, 2023 7:03 pm
sc9182 wrote: Mon Jun 05, 2023 5:54 pm (and need to continue to pay ever increasing premium $s).
Please google, "Rate Stability Regulation".
the stability may have improved somewhat - but the notices kept on coming across multiple states, and carriers. What was that recent thread that discussed this still-ongoing issue !?

viewtopic.php?t=368995&start=350
WoW2012
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Re: WSJ Long Term Care self-insuring article

Post by WoW2012 »

sc9182 wrote: Mon Jun 05, 2023 7:18 pm
WoW2012 wrote: Mon Jun 05, 2023 7:03 pm
sc9182 wrote: Mon Jun 05, 2023 5:54 pm (and need to continue to pay ever increasing premium $s).
Please google, "Rate Stability Regulation".
the stability may have improved somewhat - but the notices kept on coming across multiple states, and carriers. What was that recent thread that discussed this still-ongoing issue !?

viewtopic.php?t=368995&start=350
These statements or yours:
"...the stability may have improved somewhat - but the notices kept on coming across multiple states, and carriers" and
"....continue to pay ever increasing premium $s"

demonstrate that you don't understand the Rate Stability Regulation.

When I have time, I'll try to explain it better.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
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beyou
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Re: WSJ Long Term Care self-insuring article

Post by beyou »

WoW2012 wrote: Mon Jun 05, 2023 7:04 pm
beyou wrote: Mon Jun 05, 2023 6:50 pm
I have enough in my IRA so that if I ended up needed care I can pay with the current balance. And if I do not need care, the balance will grow.
Make sure your DPOA knows your plans. Otherwise, they may decide to care for you themselves to try to save the t-IRA.
As they would also be IRA beneficiary, that is up to them.
If they can handle caring for me, that would be my preference anyway. I don’t want to go to ALF or a NH ever if I can avoid it. If they can’t handle care, which is most likely, then the $ will be there. No plans to spend this $.

You do raise a more general issue, broader than LTC, which is to leave instructions for all that may be complex, hidden or any unusual preference, for your family. In my case, I have written a Letter of Intent regarding my trusts, accounts, professionals and intentions, to cover that which is not already evident in DPOA, Healthcare Proxy, Trusts and Wills. I continually update this doc and leave on a group share for my spouse, adult child and brother who are all successor trustees and/or other roles on these documents. LTC plans and preferences are probably a good topic to cover in same document, in case you are unable to communicate in the future. My focus so far was care for the kids and spouse, neglected myself. Guess I should add some info on that topic.
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Re: WSJ Long Term Care self-insuring article

Post by Grogs »

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.
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Re: WSJ Long Term Care self-insuring article

Post by CloseEnough »

I found the article to have a strong bias in favor of LTCi. More helpful, are the many comments in this thread that have more balance to the discussion and decision factors.

The reality is for HNW individuals, it is a crap shoot. Just like the decisions on whether to delay SS to age 70, or take at full retirement age. There are so many variables, over such a long period of time, that you can do all the analysis you want, but in the end, like a lot in life, luck will determine whether you made a good decision.

As someone with a NW that allows for self-insurance of this potential expense, I would rather take the risk that I make the wrong decision than pay high premiums for many years to an insurance company, and then have someone else in my family try to collect on the policy if needed. And in anticipation of the push back from WoW2012, full disclosure I am currently paying very high nursing home costs, out of pocket, for a family member that did not purchase LTCi. Does not change my view on this issue.
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Re: WSJ Long Term Care self-insuring article

Post by smitcat »

sc9182 wrote: Mon Jun 05, 2023 6:10 pm
smitcat wrote: Mon Jun 05, 2023 6:00 pm Have you run your plan above through any calculators to review the pros and cons?
Nothing for or against modeling tools - we are ways (possibly decades) away from needing/using those tools/modeling. We also need to consider ACA, geo-arbitration, future & kids (not just ours, but kids’ tax brackets as well) potential tax brackets, portfolio/market returns, inflation - most importantly continue to strive for further career/income growth.

Most of which (above) points are harder to model, let alone actualize/realize over multiple decades - with ever changing regulations/tax landscape. To throw wrench into planning, life can throw surprises (unexpected but possible) - disability, bad-health, D & D .. among other scenarios. Kind of hard to model those .. yes, we prepare for such “personal black-swan” events - but, hard to predict/model those ..

Anyhow - many a modeling software(s) have failed to account for ever changing (and changing at each state level) ACA (if one would consider early retire), need/utility for limited amounts of term-insurance going into RMD ages., utilizing Kid’s tax brackets into our own modeling., step-up basis assets/businesses, and/or unable to figure accumulated depreciation write-off upon demise, Trad IRAs role towards LTC needs, large deductible medical/health/vision/dental expenses planning (over 7% agi) — among other things.

Worse yet - many software prescribe (sorry to say this) aggressive Roth conversions. We love to pay taxes, but not excited to pay it upfront - considering how useful large Trad IRA could be in our case (see previous post about us not having double max-pensions, not interested in annuities).

Anyhow - by the time we consider retire/early-retire — hoping modeling software(s) will become ever more feature rich, and stop-pushing unnecessary (at-times) aggressive-Roth conversions :-)
"Nothing for or against modeling tools - we are ways (possibly decades) away from needing/using those tools/modeling."
I see there is no way for you to know if your current thoughts will be productive. How far away from early retirement are you now?

"Anyhow - many a modeling software(s) have failed to account for ever changing (and changing at each state level) ACA (if one would consider early retire), need/utility for limited amounts of term-insurance going into RMD ages., utilizing Kid’s tax brackets into our own modeling., step-up basis assets/businesses, and/or unable to figure accumulated depreciation write-off upon demise, Trad IRAs role towards LTC needs, large deductible medical/health/vision/dental expenses planning (over 7% agi) — among other things."
You could model it with a projection and with today's knowledge to see if your thoughts on the pros and cons have any merit.

"Worse yet - many software prescribe (sorry to say this) aggressive Roth conversions."
Really, which one(s)?
Have you used RPM, Pralana, or Nwe Retirment software?

"hoping modeling software(s) will become ever more feature rich"
Which features are you missing that you hope will be included?
smitcat
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Re: WSJ Long Term Care self-insuring article

Post by smitcat »

beyou wrote: Mon Jun 05, 2023 6:50 pm
smitcat wrote: Mon Jun 05, 2023 6:00 pm
sc9182 wrote: Mon Jun 05, 2023 5:54 pm
beyou wrote: Mon Jun 05, 2023 4:57 pm The SECURE 2.0 act only serves to strengthen my plan.
Now that us younger retirees can avoid RMD until the age of 75, I plan to keep my IRA as my hybrid LTC policy.

My children will get the IRA if us parents are deceased at a younger age.
If we live to a ripe old age, this money will be spent on LTC which can be a huge tax deductible expense, greatly reducing the taxation of my t-IRA.

And since we are earning market returns in the IRA instead of paying premiums to an insurance company, the pool of money should at least keep up with inflation (in fact I have a good chunk of the IRA in TIPS, but also in riskier assets that I can rebalance with the TIPS). No need to pay an insurance firm for an inflation rider nor anything. I already have enough saved in the IRA to cover common policy limits for both my spouse and myself, and the extra costs often not covered when most policies have already fully paid out, after a lifetime of maxing out my 401k and matching.

Of course this requires one has other funds to survive during retirement and avoid the need to withdraw more than the RMDs.
But if you do not have funds to live on, then how do you pay the premiums for LTCi ? It is expensive.
The best solution to caring for yourself in old age is LBYM, max tax opportunities, minimize investing costs, or better put SAVE FOR YOUR long term future. If you simply could not, tough question if you want to give what you have to an insurance firm vs buy food and pay rent. I pref the rent and food.
++1

In some of the above/other posters examples - indicating as if 3-5 years of LTCi should be pretty good — and save SS during those 5 years under LTCi coverage, and use the saved SS towards LTC needs and such.

It appears - LTCi only covers partial $amount (daily limit), and partial duration (cap/max years) of possible LTC need. Worse yet - most of new policies appear to have 3-6 months of no upfront coverage. In all these scenarios- you need monies, need decent chunk of monies in-fact (and need to continue to pay ever increasing premium $s). To top it off - LTCi need to qualify (medically?) to underwrite policy on you ..

Where’s the beef, guys !?

We would rather save large Trad IRA - and let it cover our LTC and or large medical needs (often tax deductible over 7% AGI). We be happy to let our un-spent/non-wasted LTCI premium moneys — to stay/keep invested in Trad IRAs - and simply allow it compound (btw- we sure welcome large RMDs at age 75; we do need monies to live, and can contemplate large QCDs if RMDs grow quite huge)
Have you run your plan above through any calculators to review the pros and cons?
I have enough in my IRA so that if I ended up needed care I can pay with the current balance. And if I do not need care, the balance will grow.
How large of an IRA will you want to have at various ages? (75,80,85 ,etc)
Have you compared leaving funds in the IRA vs Roth conversions and/or AA changes for pros and cons of each?
If you do not need care what are the pros and cons of a larger IRA for heirs?
smitcat
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Re: WSJ Long Term Care self-insuring article

Post by smitcat »

sc9182 wrote: Mon Jun 05, 2023 7:18 pm
WoW2012 wrote: Mon Jun 05, 2023 7:03 pm
sc9182 wrote: Mon Jun 05, 2023 5:54 pm (and need to continue to pay ever increasing premium $s).
Please google, "Rate Stability Regulation".
the stability may have improved somewhat - but the notices kept on coming across multiple states, and carriers. What was that recent thread that discussed this still-ongoing issue !?

viewtopic.php?t=368995&start=350
We know what our future LTCi will cost.
smitcat
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Re: WSJ Long Term Care self-insuring article

Post by smitcat »

beyou wrote: Mon Jun 05, 2023 11:01 pm
WoW2012 wrote: Mon Jun 05, 2023 7:04 pm
beyou wrote: Mon Jun 05, 2023 6:50 pm
I have enough in my IRA so that if I ended up needed care I can pay with the current balance. And if I do not need care, the balance will grow.
Make sure your DPOA knows your plans. Otherwise, they may decide to care for you themselves to try to save the t-IRA.
As they would also be IRA beneficiary, that is up to them.
If they can handle caring for me, that would be my preference anyway. I don’t want to go to ALF or a NH ever if I can avoid it. If they can’t handle care, which is most likely, then the $ will be there. No plans to spend this $.

You do raise a more general issue, broader than LTC, which is to leave instructions for all that may be complex, hidden or any unusual preference, for your family. In my case, I have written a Letter of Intent regarding my trusts, accounts, professionals and intentions, to cover that which is not already evident in DPOA, Healthcare Proxy, Trusts and Wills. I continually update this doc and leave on a group share for my spouse, adult child and brother who are all successor trustees and/or other roles on these documents. LTC plans and preferences are probably a good topic to cover in same document, in case you are unable to communicate in the future. My focus so far was care for the kids and spouse, neglected myself. Guess I should add some info on that topic.
"If they can handle caring for me, that would be my preference anyway."
We did that for our parents - FWIW there was a big gap between what we could handle and what would be considered reasonable. Choose carefully for loved ones.

"If they can’t handle care, which is most likely, then the $ will be there. No plans to spend this $."
It is great that funds are there - the question becomes how best to deploy them for your use and the future use of your spouse and/or heirs.
That is when the modeling calculators come in and provide a method to review the potential future scenarios that you are most likely to occur.
You could also run as many variations as you want ....to see what might happen with any 'unusual' case that may come into your thoughts.
smitcat
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Re: WSJ Long Term Care self-insuring article

Post by smitcat »

CloseEnough wrote: Tue Jun 06, 2023 7:10 am I found the article to have a strong bias in favor of LTCi. More helpful, are the many comments in this thread that have more balance to the discussion and decision factors.

The reality is for HNW individuals, it is a crap shoot. Just like the decisions on whether to delay SS to age 70, or take at full retirement age. There are so many variables, over such a long period of time, that you can do all the analysis you want, but in the end, like a lot in life, luck will determine whether you made a good decision.

As someone with a NW that allows for self-insurance of this potential expense, I would rather take the risk that I make the wrong decision than pay high premiums for many years to an insurance company, and then have someone else in my family try to collect on the policy if needed. And in anticipation of the push back from WoW2012, full disclosure I am currently paying very high nursing home costs, out of pocket, for a family member that did not purchase LTCi. Does not change my view on this issue.
"The reality is for HNW individuals, it is a crap shoot. Just like the decisions on whether to delay SS to age 70, or take at full retirement age. There are so many variables, over such a long period of time, that you can do all the analysis you want, but in the end, like a lot in life, luck will determine whether you made a good decision."
Agreed - but you can model any of these that you want and review the potential outcomes to aid in your choices along the way towards the best choices for you.

"full disclosure I am currently paying very high nursing home costs, out of pocket, for a family member that did not purchase LTCi. Does not change my view on this issue."
Can you share some of the advantages and disadvantages of this situation?
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WoodSpinner
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Re: WSJ Long Term Care self-insuring article

Post by WoodSpinner »

smitcat wrote: Mon Jun 05, 2023 5:58 pm
beyou wrote: Mon Jun 05, 2023 4:57 pm The SECURE 2.0 act only serves to strengthen my plan.
Now that us younger retirees can avoid RMD until the age of 75, I plan to keep my IRA as my hybrid LTC policy.

My children will get the IRA if us parents are deceased at a younger age.
If we live to a ripe old age, this money will be spent on LTC which can be a huge tax deductible expense, greatly reducing the taxation of my t-IRA.

And since we are earning market returns in the IRA instead of paying premiums to an insurance company, the pool of money should at least keep up with inflation (in fact I have a good chunk of the IRA in TIPS, but also in riskier assets that I can rebalance with the TIPS). No need to pay an insurance firm for an inflation rider nor anything. I already have enough saved in the IRA to cover common policy limits for both my spouse and myself, and the extra costs often not covered when most policies have already fully paid out, after a lifetime of maxing out my 401k and matching.

Of course this requires one has other funds to survive during retirement and avoid the need to withdraw more than the RMDs.
But if you do not have funds to live on, then how do you pay the premiums for LTCi ? It is expensive.
The best solution to caring for yourself in old age is LBYM, max tax opportunities, minimize investing costs, or better put SAVE FOR YOUR long term future. If you simply could not, tough question if you want to give what you have to an insurance firm vs buy food and pay rent. I pref the rent and food.
"The SECURE 2.0 act only serves to strengthen my plan."
Agreed - secure 2.0 allows one to pay LTCi without tax from IRA beginning in 2026.
This in turn allows us to invest aggressively for our heirs and/or transfer funds earlier on.
I think you are mistaken….

Only the 10% penalty is waived, not the Income Tax owed …
https://www.thinkadvisor.com/2023/01/27 ... term-care/

WoodSpinner
WoodSpinner
smitcat
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Re: WSJ Long Term Care self-insuring article

Post by smitcat »

WoodSpinner wrote: Tue Jun 06, 2023 8:56 am
smitcat wrote: Mon Jun 05, 2023 5:58 pm
beyou wrote: Mon Jun 05, 2023 4:57 pm The SECURE 2.0 act only serves to strengthen my plan.
Now that us younger retirees can avoid RMD until the age of 75, I plan to keep my IRA as my hybrid LTC policy.

My children will get the IRA if us parents are deceased at a younger age.
If we live to a ripe old age, this money will be spent on LTC which can be a huge tax deductible expense, greatly reducing the taxation of my t-IRA.

And since we are earning market returns in the IRA instead of paying premiums to an insurance company, the pool of money should at least keep up with inflation (in fact I have a good chunk of the IRA in TIPS, but also in riskier assets that I can rebalance with the TIPS). No need to pay an insurance firm for an inflation rider nor anything. I already have enough saved in the IRA to cover common policy limits for both my spouse and myself, and the extra costs often not covered when most policies have already fully paid out, after a lifetime of maxing out my 401k and matching.

Of course this requires one has other funds to survive during retirement and avoid the need to withdraw more than the RMDs.
But if you do not have funds to live on, then how do you pay the premiums for LTCi ? It is expensive.
The best solution to caring for yourself in old age is LBYM, max tax opportunities, minimize investing costs, or better put SAVE FOR YOUR long term future. If you simply could not, tough question if you want to give what you have to an insurance firm vs buy food and pay rent. I pref the rent and food.
"The SECURE 2.0 act only serves to strengthen my plan."
Agreed - secure 2.0 allows one to pay LTCi without tax from IRA beginning in 2026.
This in turn allows us to invest aggressively for our heirs and/or transfer funds earlier on.
I think you are mistaken….

Only the 10% penalty is waived, not the Income Tax owed …
https://www.thinkadvisor.com/2023/01/27 ... term-care/

WoodSpinner
Read section #334 of secure 2 - it was our accountant that identified this.

Edit to add....
Your correct - it was not our accountant but my misunderstanding/mistake.
Our deductions for LTCUI was/is due to paying through a business.
Last edited by smitcat on Tue Jun 06, 2023 9:41 am, edited 1 time in total.
WoW2012
Posts: 1455
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Re: WSJ Long Term Care self-insuring article

Post by WoW2012 »

smitcat wrote: Tue Jun 06, 2023 9:24 am
WoodSpinner wrote: Tue Jun 06, 2023 8:56 am
smitcat wrote: Mon Jun 05, 2023 5:58 pm
beyou wrote: Mon Jun 05, 2023 4:57 pm The SECURE 2.0 act only serves to strengthen my plan.
Now that us younger retirees can avoid RMD until the age of 75, I plan to keep my IRA as my hybrid LTC policy.

My children will get the IRA if us parents are deceased at a younger age.
If we live to a ripe old age, this money will be spent on LTC which can be a huge tax deductible expense, greatly reducing the taxation of my t-IRA.

And since we are earning market returns in the IRA instead of paying premiums to an insurance company, the pool of money should at least keep up with inflation (in fact I have a good chunk of the IRA in TIPS, but also in riskier assets that I can rebalance with the TIPS). No need to pay an insurance firm for an inflation rider nor anything. I already have enough saved in the IRA to cover common policy limits for both my spouse and myself, and the extra costs often not covered when most policies have already fully paid out, after a lifetime of maxing out my 401k and matching.

Of course this requires one has other funds to survive during retirement and avoid the need to withdraw more than the RMDs.
But if you do not have funds to live on, then how do you pay the premiums for LTCi ? It is expensive.
The best solution to caring for yourself in old age is LBYM, max tax opportunities, minimize investing costs, or better put SAVE FOR YOUR long term future. If you simply could not, tough question if you want to give what you have to an insurance firm vs buy food and pay rent. I pref the rent and food.
"The SECURE 2.0 act only serves to strengthen my plan."
Agreed - secure 2.0 allows one to pay LTCi without tax from IRA beginning in 2026.
This in turn allows us to invest aggressively for our heirs and/or transfer funds earlier on.
I think you are mistaken….

Only the 10% penalty is waived, not the Income Tax owed …
https://www.thinkadvisor.com/2023/01/27 ... term-care/

WoodSpinner
Read section #334 of secure 2 - it was our accountant that identified this.
Your accountant is wrong.
The tax is not waived.
Only the 10% penalty for early withdrawal is waived.
Disclaimer: I am a licensed insurance professional and am certified as a long-term care insurance specialist.
smitcat
Posts: 13227
Joined: Mon Nov 07, 2016 9:51 am

Re: WSJ Long Term Care self-insuring article

Post by smitcat »

WoW2012 wrote: Tue Jun 06, 2023 9:35 am
smitcat wrote: Tue Jun 06, 2023 9:24 am
WoodSpinner wrote: Tue Jun 06, 2023 8:56 am
smitcat wrote: Mon Jun 05, 2023 5:58 pm
beyou wrote: Mon Jun 05, 2023 4:57 pm The SECURE 2.0 act only serves to strengthen my plan.
Now that us younger retirees can avoid RMD until the age of 75, I plan to keep my IRA as my hybrid LTC policy.

My children will get the IRA if us parents are deceased at a younger age.
If we live to a ripe old age, this money will be spent on LTC which can be a huge tax deductible expense, greatly reducing the taxation of my t-IRA.

And since we are earning market returns in the IRA instead of paying premiums to an insurance company, the pool of money should at least keep up with inflation (in fact I have a good chunk of the IRA in TIPS, but also in riskier assets that I can rebalance with the TIPS). No need to pay an insurance firm for an inflation rider nor anything. I already have enough saved in the IRA to cover common policy limits for both my spouse and myself, and the extra costs often not covered when most policies have already fully paid out, after a lifetime of maxing out my 401k and matching.

Of course this requires one has other funds to survive during retirement and avoid the need to withdraw more than the RMDs.
But if you do not have funds to live on, then how do you pay the premiums for LTCi ? It is expensive.
The best solution to caring for yourself in old age is LBYM, max tax opportunities, minimize investing costs, or better put SAVE FOR YOUR long term future. If you simply could not, tough question if you want to give what you have to an insurance firm vs buy food and pay rent. I pref the rent and food.
"The SECURE 2.0 act only serves to strengthen my plan."
Agreed - secure 2.0 allows one to pay LTCi without tax from IRA beginning in 2026.
This in turn allows us to invest aggressively for our heirs and/or transfer funds earlier on.
I think you are mistaken….

Only the 10% penalty is waived, not the Income Tax owed …
https://www.thinkadvisor.com/2023/01/27 ... term-care/

WoodSpinner
Read section #334 of secure 2 - it was our accountant that identified this.
Your accountant is wrong.
The tax is not waived.
Only the 10% penalty for early withdrawal is waived.
Your correct - it was not our accountant but my misunderstanding/mistake.
Our deductions for LTCUI was/is due to paying through a business.
iim7V7IM7
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Re: WSJ Long Term Care self-insuring article

Post by iim7V7IM7 »

It seems the subject of whether to buy LTC insurance is a perennially debated topic here. Everyone's situations are different with respect to their ability to self fund and actualize payments in the event of a need.

For us, we are in our early 60s and have no children. We have an income floor of reliable income as well. Our portfolio provides some inflation supplementation to our reliable income floor and our discretionary lifestyle. In the event of one of us passing, we will lose one of our Social Security incomes and our tax bracket will increase. So the discretionary portfolio income may be needed by one of us for longevity and maintaining a lifestyle.

We opted to buy a policy to help mitigate this should we need it. No children or unlikely sibling support system, we wanted some method to pay for the more likely assisted living or homecare for a reasonable period or a good deal of the cost skilled nursing home. We will still need funds from our retirement portfolio, but less. Self funding at an advanced age could be difficult to know what to liquidate and have tax consequences. Insurance companies can also be helpful to assist with providers because they understand the "system".

Policies underwritten today are expensive and hopefully will experience fewer price increases than the policies underwritten before the law changes in States 15+ years ago. We still will need substantial elimination period OOP funds (180 days or 2x max medicare coverage).We chose a max daily coverage large enough in today's $ to fully cover the more likely (assisted living and homecare) and pay about 60% of the less likely (skilled nursing home). Our policy had 3-year coverage for each of us with a 3rd shared 3-year pool that can be used in part by either of us. Our inflation rider is only 3%/year so if costs go up faster that will also leave us exposed to the difference.
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