Long-Term Care Planning: Five Common Mistakes
I’ve been thinking a lot about long-term care insurance lately. Not in an abstract sense, but whether this is something I should buy. Now. While I’m in excellent health. I’ve heard of many situations in which family members end up emotionally and financially drained after caring for a loved one, and that’s something I would like to avoid if possible.
To put it in broader perspective, as Baby Boomers age and average life expectancies climb, more and more financial advisers will need to broach an uncomfortable topic: aging and the need to make provisions for growing older and having extended health care issues. But as Betty Doll, principal of Doll & Associates Long Term Care Insurance Services in Asheville, North Carolina, points out, many advisers simply “don’t want to go there”; they don’t want to get into talking about healthcare issues with their clients.
Increasingly, one of the most important adviser-client discussions will be how possible long-term care expenses will be covered.
Doll said the two refrains she hears most often are: “I don’t want to be a burden to my family,” and “I want to stay at home.” But there is something of a disconnect there, unless you make plans. Which is why she likes to frame the discussion as long-term care planning, as opposed to long-term care insurance. Everyone needs a plan for care, but not everyone needs insurance.
“Long-term care insurance is not the be-all and end-all, and it’s not for everyone,” Doll said. “Sometimes because of a health issue, where people are not insurable. For some, it’s a financial issue. For some, they don’t have enough money to justify it. Others don’t have enough money to afford it. Others have plenty of money, where in theory they could self-insure, but they may choose to do that, or they may choose not to. My thing with having a long-term care plan is to literally talk about and ideally commit to writing ‘this is what I want to happen when and if I’m in that situation.'”
Here are the five most common mistakes Doll sees people make when it comes to long-term care planning:
This is the biggest one, Doll said. “Some of that is because we all think 50 is the new 30, or 60 is the new 40, and we certainly can’t be of the age where we should be talking about long-term care planning yet, but in reality, the average age of the current long-term care purchaser these day is 57 years old. People are seeing this as overall pre-retirement planning. Procrastinating has implications from an underwriting perspective and also from a cost perspective. But also the reality is that anything could happen at any point in time.”
2. Denying that it could happen.
While Doll didn’t elaborate on this point in the slide, “it” no doubt refers to chronic illness, such as Alzheimer’s or ALS, or injury.
According to the Alzheimer’s Association, Alzheimer’s disease is the sixth leading cause of death in the United States. More than 5 million Americans are living with the disease, and one in three seniors dies with Alzheimer’s or another dementia.
Yet, “Alzheimer’s disease almost never appears in obituaries or even on death certificates. The disease, experts say, is one of the few that still carries such a stigma that families and patients often refuse to acknowledge it or call it by name.”
(Not to scare you even more, but according to the Journal of Head Trauma Rehabilitation, there are at least 5.3 million Americans living with a disability as a result of traumatic brain injury. Each year, at least 230,000 people are admitted to hospitals with TBI. More than 80,000 of them, or nearly one third, experience long-term disability as a consequence of their injuries.)
3. Underestimating the impact on the family.
I heard an interesting statistic on this when I spoke with Martin Shenkman, a New Jersey–based attorney and financial planner, for an earlier blog post: the average life expectancy of a spouse caregiver for someone living with Alzheimer’s is reduced by four years. “The stress of being a caregiver can be significant,” he said.
4. Underestimating the cost of care.
U.S. News recently partnered with experts in senior health and financial planning for a live Twitter chat (#LTCareCosts) that explored families’ options for covering the costs of long-term care. The panelists discussed long-term care insurance, price differences among various types of long-term care, how seniors can age at home, and the emotional and financial costs of becoming a caregiver.
Q1 What types of long-term care should people expect, and about how much does each type cost? #LTCareCosts
— U.S. News Health (@USNewsHealth) January 9, 2014
A1: Nursing homes, assisted living facilities, adult day centers, and in-home care – Avg. $80K, $40K, $15K, and $45K yearly #LTCareCosts
— LTC Tree (@LTCTree) January 9, 2014
5. Basing one’s plans on the decisions of others.
We all have unique circumstances (financial situations and medical histories). Ultimately, you need to make a decision based on what’s right for you and your family — not on what friends or family are doing.
If you’d like to read more, see, “Long-Term Care Insurance: Is It Still Worth the Price?” (Feb 2014) and “Should You Purchase Long-Term-Care Insurance?” (May 2012).
Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.
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