Long Term Care Insurance (LTC)

Long Term Care

Care for aging adults, or long term care (LTC), is an important financial planning consideration for any adult over the age 50.  Indeed, one of the greatest fears many seniors have is how they will afford an extended nursing home stay, should one be necessary.  While twenty years ago LTC insurance plans provided guarantees that their very affordable premiums would never increase, the same is no longer true.  Instead, seniors now are faced with pricey policies at the time of purchase and then almost annual policy price increases.

Seniors faced with the LTC dilemma should know that buying a LTC insurance policy is not their only option.  It’s important to consider, or at least know about, the numerous and varied options besides LTC insurance.  For instance, some may wish to “self-insure.”  This involves placing an amount, perhaps $5,000/year that would otherwise have been paid towards a LTC policy into an investment account.  Another option is to use the equity in their home via a reverse mortgage to pay for any needed LTC.  A third option involves purchasing a rider on a life insurance policy.  A fourth option involves developing a plan of care with a family member who may wish to be a paid caregiver to the aging parent.  Finally, for some, medicaid is a last resort that may work just fine.

Seniors should also know that LTC policies reward the sellers of such policies with large commissions.  And while that in itself does not make them a bad choice, it should at least be recognized.  Especially when you have no relationship with the selling agent.  Free one night (including dinner) seminars are not uncommon and they often are designed to scare attendees into quick purchases.  No mention is usually made of the fact that while LTC facilities may charge $80,000 or more annually, very little expenditures are required outside of that.  Indeed, most of a LTC resident’s previous expenses (groceries, eating out, entertainment, travel, etc.) will cease.  Thus, incremental LTC expenses may only be $30-40,000/year.

In the end, seniors should have a plan- whatever it may be.  Likewise, children of aging parents should query their parents on what their plan is.  Whether it’s purchasing LTC insurance (and to be sure, this is a great option for some people) or another one of the options listed above, the most important thing is that something has been decided, shared with their family, and the appropriate implementation steps taken.

The Prior Month

Stocks eked out a small gain in May with the S&P 500 adding 1%.  A new all-time high was briefly touched mid-month before a pullback closed out the period.  Interest rates rose as market participants tried to “game” the Fed’s expected raising of interest rates later this year.  The ten year bond rose from 2.05% at the start of May to a high of 2.34% before later pulling back.  Meanwhile, thirty year mortgage rates again rose slightly to 3.87% and the unemployment rate crept up a bit to 5.5%.

This Month

The market has largely turned its attention to interest rates as the summer begins.  While the Fed has said they won’t begin raising them until the fall, at the earliest, market participants have begun adjusting their portfolios in anticipation of the move.  We think these adjustments are premature and will only need to be “adjusted back” later this summer.  Meanwhile Greece missed an interest payment on its debt last week, the first time the country has done that.  Leaders of the economically struggling country promised they would bundle the missed payment with other payments yet to come later this month.  Otherwise, stocks have been “home on the range” for pretty much all of 2015 and not really providing any long-lasting, meaningful movement (The S&P 500 is up about 2% for the year).  We’re doubtful June will be any different.

Progressive Greece (and Flo) say not to worry, bundle the missed payment!  

Credit Tip of the Month

While legislation in some states limits the use of how employers can use credit reports, some 34% of would-be employers now admit to screening their job applicant’s credit history.  That said, no matter where you live, an employer must ask for your permission before they can pull your credit file.  So, before you start applying for jobs, it may pay to clean up your credit report as best you can or at the very least be prepared with explanations for potentially negative items they may see.

Chrome Calendar

Two more Boulder county yards were busted in May.  While the weeds were deep, our weed wacker and rake were up to the task.  Join us if you can Saturday, June 20th, for the next Yardbusters of the season.  For those unfamiliar with the program, Yardbusters is a group of volunteers organized through Boulder County Care Connect that help the elderly and disabled of Boulder county take care of their yards.  So join me as we take care of some general yard maintenance like mowing, raking, weeding and/or trimming.  Free lunch provided.  E-mail me if you’re interested in coming.

Boulder Yardbusters

Fun Fact

Choking is the 7th leading cause of death among Americans.  First world problems…

Have a great June,

Steve Zakelj, CFP®

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