The Rich Life Blog

Are You Preparing For Your Long-Term Care?

Posted by W. David Kern

September 14, 2017

Like estate planning, long-term care (LTC) planning is a critical component for building a financially secure future. However, many people tend to put it off or actively avoid it all together. The advantage to planning ahead is that you’ll gain flexibility in how to deal with the mental and financial costs of a long-term care event. The question then becomes: how do you best address this particular risk that most will face later in life? Adding a long-term care insurance policy to your overall wealth portfolio is a well-known solution to this problem. However, some people may choose (or may be forced) to self-insure against this risk due to the ever-increasing costs of long-term insurance. Here are some things to think about as you address long-term care planning…

Chances are high you will need long-term care…

Thanks to modern medicine, we’re living longer than ever. But that also means we’re more susceptible to cognitive impairment as we age, and that often makes daily activities difficult enough to require assistance. Hiring help to perform activities of daily living can be costly (particularly if conditions persist indefinitely) since Medicare payments cease if your stay in a skilled nursing facility exceeds 100 days. From Day 101 on, you will be responsible for all costs – which can drain your financial assets rather quickly.

Long-term care insurance policies aren’t getting better…

The unfortunate reality is that this kind of coverage is an increasing loss leader for insurance companies. When long-term care is needed, it’s usually necessary until death – since people are living longer, insurance companies are experiencing longer-than-assumed payout periods for their policies. Combine this with a low interest rate environment and poor actuarial assumptions, fewer companies offer long-term care contracts today.  Those that do, have significantly increased premiums on existing policies. The bottom line…long-term care insurance is getting more and more expensive.

Buy early, or put an alternative plan in place…

If you’re interested in long-term care insurance, consider shopping sooner rather than later. Explore your options to ‘partially insure’ against a LTC event vs. ‘fully insuring’. You’ll be responsible for paying more out of pocket if you require LTC, but you will also save money on premiums payments. You can also explore the alternatives to buying LTC insurance. Consider involving your family in conversations around long-term care. If your family is willing and able to assist in your long-term care, talk through what that might look like. If you are in your 20s – 40s with a few decades to spare, consider setting aside a bucket of money to help pay for future medical and/or long-term care expenses. If you have access to a Health Savings Account (HSA), focus on funding this account as much as you can each year. Over time, you’ll find yourself accumulating a bucket of money that can then be used tax-free – not only for general medical expenses, but also for long-term care you may require down the road.

The need for long term care is only going to increase as people’s life expectancy continues to rise. Whether you end up self-insuring or buying a LTC insurance policy, do your homework and build out a plan that makes sense for you and your family.


David Kern is a Wealth Management Advisor at Wealthquest – a Cincinnati based financial planning and wealth management firm that offers a full range of financial services under one roof, for one simple fee.

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