Consider It "Retirement Insurance"

As our country ages, roughly 70% of all American families will face the daunting task of paying for Long-Term Care expenses.   Some will have planned ahead, however the majority will be forced to use their retirement savings to pay for these expenses.   If you and/or your clients are in this majority, perhaps it’s time to consider “Retirement Insurance” in the form of a LTC Plan.

 

Let’s look at a 65 year old couples retiring in today; we’ll call them Carl & Carol Consumer.   With the couple entering into a relatively comfortable retirement we’ll fast forward to 2032.  This is when Carol develops a need for Long-Term Care in a Nursing Home environment; care which is projected to cost approximately $12,000 per month.   

 

After spending two years in the nursing home, Carol passes away, but only after Carl used over $400,000 of their retirement savings to pay for his wife’s care.   The Consumer’s didn’t have a Long-Term Care Plan, they didn’t realize Long-Term Care expenses weren’t covered by Medicare and, as a result, they were completely unprepared for the entire ordeal.  

 

Making a difficult situation even worse, the Long Term Care need came in the midst of a market correct of more than 20%....something which has occurred 7 times since 1926.   Since the Consumer’s had no “Retirement Insurance” (in the form of a Long-Term Care Plan), Carl is now facing a number of difficult circumstances.

 

#1.   The couple was relying on the income generated by their retirement accounts, and with the depletion of $400,000 from the couple’s nest egg.  Now there is a very real concern Carl’s comfortable retirement is now in jeopardy.   Especially when the $400,000 was withdrawn during a market correction and those assets will never have the opportunity to recover in value.

 

#2.   Since Carol’s care was being paid for from the couple’s retirement accounts, the PRE-TAX cost of care was actually more than $16,000 per month, not just the $12,000 month for the Long-Term Care expenses.  

 

#3.   The additional income for two years, totaling almost $200,000 per year, resulted in significant tax increases and unknowingly caused Carl’s Medicare premiums to increase substantially due to “means testing.

 

With a little prior planning, all of this could have been avoided.....

 

At the end of the day, all Americans need to understand the potential need for Long-Term Care, and how they plan to deal with this specific healthcare concern.   Far too many people think Long-Term Care Planning is something which can be ignored, but in reality it’s simply “Retirement Insurance”.....

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© Mike Padawer - 2016