In early March, my mom was diagnosed with Multiple Myeloma. MM is a cancer of the white blood cells that attacks the bones. This caused two stress fractures, one in her upper arm and one in her thigh. This resulted in three surgeries along with five weeks of hospitalization and rehab. Prior to this, she was living independently, driving, and active in church. Cognitively she’s fine, but now, her mobility is the issue.
Planning for the worst, hoping for the best
There are only three ways to pay for long-term care – either you pay out of pocket, an insurance company pays, or the government pays.
So, in 2000, shortly after I became an advisor, my mom purchased a Long-Term Care insurance policy through me. I initiated the conversation with her at the time partly because three of my grandparents – including her mother and father - required long-term care and were not able to afford the cost out of pocket, instead relying on Medicaid. As my mom approached 60, I wanted to make sure she had choices if the time came.
Her policy has a 90-waiting period before it pays dollar one (she is now 80+ days into receiving care). Through a local agency, her home care costs $34 per hour, 7 hours per day, 7 days per week. If you do the math, that’s $21,420 out of pocket in just 3 months.
In my experience, this is the single biggest risk to most people in retirement.
Retirement generally happens in 3 phases – the “go-go” phase, the “slow-go” phase, and the “no-go” phase. The scenario I typically see is where one spouse needs care first (usually the husband who is older and has a shorter life expectancy), and if they’re able, the other spouse becomes the caregiver. They do this for a time until they are simply unable, and then the spouse that needs care enters a nursing home for the remainder of their life. This is when the couple really begins to draw down their nest eggs because of the cost, partly because at the same time, the other spouse is still home and needs to continue paying the household expenses along with the nursing home expense. Then, if and when the remaining loved one needs care, there is likely to be substantially less money, so their care falls on a family member - likely a child or younger sibling.
Let’s face it, nobody likes paying for insurance, especially if they never use it. But for long-term care insurance, the odds you’ll need it is better than your auto and homeowners’ insurance!
According to LongTermCare.gov, Statistically, if you reach 65, you have almost a 70% chance of needing some form of long-term care. Women will likely need care longer - 3.7 years vs. 2.2 years for men - and 20% of today’s 65-year-olds, will need it for longer than 5 years.
Let me end with this, the pool of money my mom’s policy has created over 23 years gives both of us choices we would not have otherwise had, and the peace of mind knowing she is going to be well cared for, at home, for the foreseeable future.
I always feared this day would come, but as the eldest son of someone who now requires long-term care, all I can say is this was, without a doubt, the best insurance sale I ever made!
Michael P Henderson, CFP® CKA®
Founder – Crossover Point Advisors
CERTIFIED FINANCIAL PLANNER™ practitioner