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It's important that my clients have the opportunity to work with professionals like Michael and Mary Ellen to review their options and make an informed decision on this key component of their retirement plan.
- Jim, Financial Advisor, Phoenix, AZ

What do financial experts say about Long-term care insurance?

Excerpt from Cracks in the Nest Egg

Wall Street Journal, October, 2001

What are the biggest mistakes investors today are making with their nest eggs, both before and after they retire?......

1. Failing to consider long-term care needs.

When people think about threats to their retirement savings, "they primarily think about market losses," says Joe Bowie, chief executive officer of Retirement Investment Advisors Inc. in Oklahoma City. What they fail to consider, he explains, are the non-market-related threats-health care, long-term care-the catastrophic events" that can cause as much harm, or more, as a volatile market. First, the good news: Most of us will never end up in a nursing home. Now the bad news: More than 50% of Americans will need some form of long-term care, either home care or institutional care, at some point in their lives, according to the Health Insurance Association of America.

Nest Egg Protection

Kimberly Lankford, Kiplinger's Personal Finance Magazine, June, 2004

Buying long-term care insurance can be one of the best ways to protect your retirement savings from a potentially catastrophic expense. According to the MetLife Mature Market Institute, the average private room in a nursing home cost more than $66,000 a year in 2003. At an average of $18 an hour, 24-hour in-home care can cost much more. If costs continue to rise by about 5% a year, the average price tag could reach $175,000 a year in 20 years.

"It's a simple question of whether you can afford to self-insure long-term care or not," says Marilee Driscoll, author of The Complete Idiot's Guide to Long-Term Care Planning. "For most people, the answer is no. They can't afford to pay out of pocket, the same way they can't afford triple-bypass surgery out of pocket."

Even some people who can afford high bills choose to buy insurance. That way, they can spend more of their retirement nest egg without worrying about setting aside extra cash to cover potential long-term care expenses.

Patricia Brennan, a certified financial planner in West Chester, PA, advised one wealthy client with plenty of savings to drop her long-term care coverage, but the client decided to keep the policy. "She said, 'If I can afford the cost of long-term care, I can certainly afford the insurance for it. I would much rather pay for it this way than have my children pay for it out of their inheritance," says Brennan.

U.S. Department of Labor

Jordan Pfuntner and Elizabeth Dietz, Bureau of Labor Statistics, January 2004

Long-term care insurance offsets the risk of a large financial drain if one should need medical and custodial care for chronic conditions which are not covered by health insurance plans. Traditionally, a person needing long-term care would turn to family members to provide unpaid, informal services, but with a greater incidence of divorce, dual-career families, and mobility in today's society, it is less likely that the extended family will be available to provide care. If a person has substantial savings, he or she could use them to pay directly for the full cost of care.

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