Well, do you have a long term care game plan? Today we're going to take a look. Well, have you considered long term care insurance? What is your game plan in the event that you do need long term care? your long term care specialist, Casey van size is my guest today to tell us what we need to know. Casey, welcome to premium money.

Thank you so much, Bob, pleasure to be here. You know, as far as insurance goes, people will consider life insurance Still, the word you know, worry about the health insurance. Not much thought, though, is put into long term care and it is a risk that we're going to be facing. You know, I think a lot of it is a lack of education and lack of education on options. Well, Bob, I think you're right there. You know, there's a lot of misinformation out there and people might think that they're actually already covered with their health insurance plan or, or that the government is going to step in and take care of them with Medicare, Medicaid.

But right now, we know that those who are turning 65 today have a 74 chance of needing long term care at some point in their lifetime. Yet less than 10% of seniors actually have a long term care policy, most likely because they're assuming that that it's covered when, when in reality may not be. Well, let's talk about a few of the details of how these policies work. First of all, you know, how do you even qualify for long term care. So, long term care will long term care insurance benefit will be triggered by either the inability to perform two out of six of the regular activities of daily living which are eating bathing, toileting, transferring, dressing, incontinence, or for cognitive impairments such as Alzheimer's disease. Well, what age should someone really start thinking about long term care the the earlier the better.

Similar to life insurance, you know, the the younger you are when you Set up your policy, the lower the cost is going to be. We have folks who are even as young as 40 if they have the means can address that concern, and save dramatically against someone say, waiting till they're 65 or, or 80. You know, to set up a plan. You know, obviously nursing home care even home health care is extremely expensive. And but specific to Dallas Fort Worth area, what is the average cost? Well, the average cost, it depends on where you're receiving that care.

You know, most people prefer to stay in their home if they can, and they will stay in their home as long as possible. As long as their means allow them to do so. The average cost in in home is about $45,000 a year. an assisted living facility, it's kind of considered the next level of care up. If you're staying at home is not an option. It's it's a similar cost 45 to 50,000 dollars a year for assisted living in our area, a private nursing home room, the price goes way up anywhere from 72 to $97,000 a year.

Yeah, those are real numbers too. And you know, what's interesting, I was surprised to learn that the average stay at a nursing home is not as long as you know, one would think that's very true. You know, nursing home, you know, as we kind of just mentioned is kind of a last face. You know, most people will try to stay at home as long as they can, or maybe move into assisted living. Nursing Home is really kind of that last phase where the most advanced level of care is going to be needed. And that's part of why the stay in the actual nursing home facilities is shorter.

Statistically. If you look at the largest claim paying Long Term Care Insurance Company, they say that a nursing home stay is for you know, 42% of claims are for a year or less. Okay, but for those who asked beyond A year, the average is about 3.9 years, you know, call it four years, if you survive past a year at a nursing home. Now, for those who, you know, are 65 or older today, statistically, we know about 20 20% of those people who do need the care will actually need care for five years or more. So the problem with the averages is that, you know, of course, if I'm standing in a bucket of ice water, my and my hair's on fire, then on average, you know, I'm pretty good. But there's extremes to those situations.

And the care could be needed for a significant amount of time, or it could be very short amount of time, but there's no way to know for sure. Well, of course, when you get a long term care policy, you have the option to choose the length of coverage. What you know, what should you be considering based on these stats? Well, most people will kind of use that four year estimate and We'll buy a plan for coverage between three and four years. You know, when they're determining what kind of plan really fits their budget, the two drivers of the cost are the, you know, duration of time that you want coverage for, or the monthly benefit amount that you want to receive. So, you know, if someone wants, you know, usually a two year plan, with a nice, monthly benefit, based on today's average cost, is probably going to get the job done for most people.

If they if they really want to be very prudent and conservative, and planning for the worst, then there's even lifetime benefit plans that are available today. Now, what are you seeing as to the annual rising cost? Well, over the past five years, it's actually been surprising in the industry, it's been about two and a half percent, which is a little bit less than what's expected going forward. are really expecting about a 3% probably increase in cost of care going forward. Of course, with life insurance premiums are locked in for the for the term. If you you know, if you're using term insurance, what about long term care?

Are premiums locked in? Or can they go up? Good question. It really depends on the plan that the person wants to choose because you can go anywhere from a paid up policy, you write up, you know, single check and your entire policy is paid up at once. Or you can go with a monthly premium, kind of like paying for your car insurance and pay as you go. Some plans have guaranteed premium, so the premium can never go up.

If there's some of the more new age, you know, linked to benefit plans, the more traditional long term care plans if you just try to, you know, pay the lowest amount possible. Just like say a Medicare supplement the rates can go up In the future, if you choose that type policy. Now, when you buy a long term care policy, you have the option to insure against the rising cost of health care. Talk about how the inflation writers work and the options that you have. Right so especially for for those who are setting up a plan at a young age, you know, they're planning ahead and inflation writer, anywhere from one to 5% is available, you know, to to increase that monthly benefit to keep up with the pace of the rising cost of care. Now, the older the individual is, when they're actually setting up their plan, the less advantage is fee inflation is and more costly it is.

So typically, if someone is 60 or under, we very often recommend inflation. If they're 7080, you know, it might be cost prohibitive. But of course in the planning process, we help figure out what's the best fit for the budget. Now, these these these policies He's have all types of bells and whistles and do different do different things. One of the features that some companies offer is a cash option. Talk about how that works and, and how that can be an advantage.

Absolutely about the the cash option is the best benefit of it is that you can use the funds from the insurance company to pay a family member for care or for an informal caregiver IE someone who's not a licensed nurse, you know. So that's the biggest advantage of a cash benefit. Most long term care plans if they don't have a cash option, then or they are simply reimbursing you for actual expenses. And it requires the the services to have been provided by a licensed caregiver. So a lot of folks have kids or you know, maybe a grandchild who is very hands on wants to be there for their grandparent or parent If you have a cash option, it allows you to actually compensate that family member for their time away from their job or their other family responsibilities. added benefit.

Well, yeah, it sounds like it. One of the other benefits of a long term care policy is that the non forfeiture benefit, talk about how that one works. Yeah, so non forfeiture benefit is, is built in protection, that in the event that you cancel your policy, you know, maybe something happens and you can't pay your premium anymore, you know, you decide to cancel the policy. The non forfeiture benefit, basically turns the premium that you've paid up to that time into a pool of funds that you can still use if you do need long term care. So even if you cancel your policy, you can still get you know the premium you put into it back if you do actually end up needing care. Now obviously Long Term Care Insurance is not cheap, especially if you know if you're in your 60s and kind of getting a Let's start on planning, talk about some creative ways that you can still get coverage but maybe reduce the cost a bit.

Of course, if you're wanting to, you know, save some money on that insurance, then you know, buying a shorter coverage period, you know, talks about maybe a two year coverage period is one way to do that, that's going to lower the cost. You can also, you know, plan to co insure, you know, maybe say, if the average cost a month is $6,000, for the private room in the nursing home, I'm going to only buy insurance to cover half that and I'll pay the rest out of pocket, you know, especially if you have existing guaranteed income streams and retirement, pension, Social Security, annuity income, that type of thing. You may already have a significant income there and you might not need a policy with a full $6,000 benefit. So that'd be one way to do it. You know, I was just thinking, Casey that if you're if you're going to look into long term care insurance, you really got to get connected with someone That is going to sit down and take the planning aspect of this seriously because there are ways to reduce the cost.

There are ways to self insure to a coinsurance, you say, and you definitely want to make sure that you're looking at all your options, so that you're not paying too much for this. Absolutely right. Yeah, you never, you don't want to overpay for more than you need. But you want to make sure that you have at least enough for the expected cost at a minimum. And definitely working with a planner who understands your full financial picture is very important there. Now, there's some real advantages.

If you own your own business, I don't think a lot of people know this. This is something where you can actually have the business pay for it talk about how that works. That's very true now. It's gonna be specific to the type of business that you have and you'll want to talk to your tax advisor about your specific situation. But one of the biggest advantages for certain business owners That the premiums they pay for for certain types of long term care plans can be fully tax deductible, they can actually set up policies with full discrimination, meaning that you don't have to buy a long term care policy for every employee, you can pick which ones you want. You can also buy a plan for your spouse if you're a business owner with business funds.

So there are a lot of advantages, especially for business owners. Now, obviously, you go through the applique the application process, and they're gonna evaluate your health and make sure that you're a risk that is worth taking the insurance company, what are some health conditions that probably would not get accepted for long term care? So Good question. There's, you know, in today, there's a very broad spectrum of types of long term care policies available we actually have plans that allow us to provide protection even if someone is completely uninsurable for traditional long term care, they might actually call For an alternative plan, but if we're talking about traditional long term care, the risk to the insurance company is is based on your morbidity. In other words, the odds of you actually needing some care so arthritis you know, mobility issues, you know, such as like rheumatoid arthritis, anything that's gonna cause you to need assistance to move around like a wheelchair, you know, Walker, things like that are going to affect the qualification for a normally underwritten policy.

Any memory has issues, histories, memory problems, you know, head injuries, things like that. autoimmune disease issues, you know, can also lead to significant need for care down the road. So those are some things insurance companies are looking for, for some of those underwriting plans. Now, for those who don't have traditional Long Term Care Insurance, there are other options as you were talking about, talk about though what it would look like if a person were to self insure. Right so if someone was to self insure you we kind of talked about earlier, the, you know, in our area 72 to $97,000 a year, you know, for a private nursing home, you know, per person. So if you're an individual and you assume, you know, an average claim, you know, three to four years, and you want to set aside enough cash for that, you know, if you round that off to $100,000 a year, you're looking at about $400,000 of your own cash that you'd have to set aside if you want to self insure, you know, for one person for a couple, you know, doubling, we've had $800,000, statistically, females, you know, women live longer, and they need care for longer periods of time.

So, and that's sometimes as part of the decision process for a couple years, you know, you want to potentially put more insurance on on her, knowing that she may need care for longer. But the problem right now, Bob, is that we know you can go to long term care.gov and see all these statistics, but less than one third have folks who are 50 or older are actually saving for this wrist. They're just, you know, ignoring it. You mentioned Medicare a little earlier in the the program, how does that fit into the equation? So that is, you know, one of the misunderstandings about Medicare is, you know, Medicare is is health insurance, you know, it's gonna cover hospital, you know, stays, and things like that, but it does not cover long term care, which is, you know, again, the inability to perform two out of six activities of daily living, or cognitive impairment doesn't mean you're going to need to be in a hospital, it means maybe you can't cook for yourself or clean for yourself.

And that is where the bulk of the long term care cost is, is is having someone come in to assist with those issues. So Medicare is not going to cover that. Medicaid, which is the safety net, you know, for impoverished people will pay for long term care. But in order to qualify for Medicaid, you basically have to be financially destitute with very little savings left, or you have you have to have, you can't have more too much income that you're receiving each month that can disqualify you there. So, well, let's talk a little bit about, you know, insurance companies are thinking out of the box, putting these alternative plans together, and there's one that's called asset based long term care where a person could reinvest a lump sum of money into a policy that will create a long term care benefit as well as a life insurance benefit.

Talk about how that works. Yeah, these are those are definitely the most popular plans right now. And an asset based long term care policy covers more than one base you know, at once, as you said, it's, it's gonna have if it's a life insurance, combination policy, it's going to have a tax free death benefit to the family. When the person passes away, it's going to simultaneously, you know, turn that lump sum of money into a much larger pool of funds that's available to pay for long term care. Also, that would be tax free when it's received, for example, you know, I have a young lady about age 60 purchased a policy for $100,000. And that provided her with over $600,000 worth of long term care funds instantly.

You know, you also there's another option by using an income annuity talk about how that works. Right, especially for those who you know, have not planned for long term care, you know, maybe they're, they're in a facility right now. Yeah, they never purchased that Long Term Care Policy and they're paying out of pocket they did the self insurance thing. Or a child who has a parent who's in that circumstance You can use an income annuity, to guarantee that that long term care expenses paid for no matter how long that patient lives. So you can basically take, you know, a single sum of money today. And the older that person is, or the more severe their care needs are, the higher the income that's produced from the annuity.

You know, for example, if, if the normal payout from the annuity is, you know, 14% for life, then, but they're, they're ill then pay out more like 20 or 25% on the dollar for life. So you're able to convert a lump sum into a, an unending income stream, and that will really provide some protection, especially if the person has long Gemini. Well, Casey, I really appreciate you coming on the program. This is great information. I think that some, the listeners have learned something today, and I really do appreciate you coming on the program. I'm happy to be here, Bob, thanks so much.

You know, it's interesting to hear some of these stats of how many people actually have long term care. And in the fact that this is a real risk, one of the things that, that you do in the, in the financial planning process, is you you work towards creating financial independence. And that that I always define that as the day that you can earn that you it's a choice to earn an income, you're either gonna, you know, right now we have to work we have to earn an income, but you get to a point to where you built up your assets, you built up your investments that now that can replace your income and that's financial freedom. And so we always want to look at Okay, we've got that aspect of it done. Now, what could what could ruin retirement and its long term care Any kind of an illness, disability that forces you to go into a home.

And you know, fortunately, the in the insurance industry has really done a good job of getting creative and building some real good programs that are a little bit more cost effective. But you know, we talked about at what age is a good age to be looking at, I would say in the 50s. In, that's really when I would encourage you to start to really thinking about it. It's still, you know, obviously, as Casey said, the younger you are, the less the smaller, the premium, but I've talked to so many people who've gotten into their 60s, where it is cost a lot more, and they've kind of regretted not having that taken care of back in their 50s. But, you know, there are a lot of creative programs and I want to stress once again, there's a lot of people, there's a lot of advisors who will just sell you a policy, but you need to spend a lot of time on the front end with somebody that's going to go through the process, the planning process, look at your assets, look at what kind of income you have coming in, you know, for instance, it might be that you have from various, various programs, maybe $6,000 of income coming in.

It might be that you put a game plan together that you're going to self insure with 3000, that 6000 your spouse could still be okay. And you're going to do another supplement of 2000. Or there's just a lot of creative ways that you can do it. I think that the bottom line is simply this is that you've got to have a game plan, you got to be able to answer the question if this were to happen, at that time in my life, what would I do? And you know, the other thing that I've seen adult children do is you might have two or three siblings and concerned about long term care for your your parents, and I've seen where they have pitched in money and either helped protect Just the policy or actually bought the policy for their parents. But it's just definitely it's something you don't want to ignore.

And it might be that you've decided, well, I'm going to self insure the whole thing, I've got the means to do it, then that's fine. Just make sure that you've checked that box that, you know, this is this is what I'm going to do. I've talked to through the years, I've talked to so many people who have not been prepared for it. And I've talked to people who have been prepared for it, and they're just so grateful. I know that when my dad passed away, I took out a long term care policy on my mom. And we held that policy for 10 years, had the inflation rider on it.

And when she finally she had Alzheimer's, we put her in the home that policy with that inflation rider paid every single penny of that cost for three years. And I know that that's something my brother and I would not would not want to have to tackle because it is expensive even back then 10 years ago, it was something like 40 $500 a month. So just something to consider. This is Bob Brooks we got a question for me go the website triple W dot prudent money.com Have a great rest of the day.