Time is Now to Plan for LTC

LTC may cost more than clients think

Regardless of where you practice, the costs of long-term care are staggering and will likely continue to rise. On average, respondents from a recent survey underestimated the annual cost of a private room in a nursing home by roughly half as much as what they actually are. Plus, the cycle of care is not linear, and it could quickly become overwhelming. Care might just as easily commence with the need for nursing home care as it could with an in-home health aide.

Americans generally look first to their savings to pay for the care they might need. They expect that their savings, in combination with health insurance and government entitlements like Social Security and Medicare, which are not designed to meet most long-term care needs, will cover the potential costs.  Without a common understanding of the real costs and who pays, clients could make false assumptions that can leave them exposed. A common misconception is is that a combination of Medicare and health insurance is a way to meet the expenses of paid long-term care. Until they start using their Medicare coverage, clients don’t realize what’s covered by Medicare and what’s not. Medicare does not cover long-term care or custodial care. It’s limited to special circumstances and situations, such as a portion (up to 100 days) of skilled nursing facility costs, triggered by a minimum three-day hospital stay. And, limited coverage for certain home care.

A long-term care event can accelerate the risk of drawing down retirement savings

Advisors see the last 10 years of retirement as being a period of high risk for clients. As individuals grow older, the potential for a long-term care event increases, which can cause clients to spend their assets too quickly. When clients need long-term care and have no insurance in place, advisors estimated the average annual withdrawal rate from savings to more than double, from 5% to 13%. A client who needs extended long-term care, which can be common in later stages of Alzheimer’s, for example, can be at high risk of depleting all their assets when no other sources exist to pay for care. And then there is Medicaid, meant as a safety net for those with limited assets and income. Clients might not know that they can only benefit from Medicaid after they’ve spent down most of their assets, a situation many advisors avoid for their clients.

 America’s attitude toward caregiving is evolving

Out of all the risks associated with long-term care—financial, time spent providing care, physical and emotional burden—families expressed their biggest concern was the emotional risk (72%), and this number was even higher for those who’ve been through a caregiving situation (84%). For a client who has seen or experienced the responsibilities of long-term care up close, an opportunity exists for advisors to begin a broader conversation about long-term care. More than half (52%) of those Americans who have provided care said their experience as a caregiver changed how they are planning for their own future. More than two-thirds of parents (72%) said they don’t want their children to feel the burden of caregiving. And children’s attitudes have evolved as well, with 61% of sons and 51% of women expressing reluctance about providing care to a parent.

Families who haven’t discussed caregiving in the open may be unaware of how their loved ones feel toward providing care. In a survey, respondents recognized their own limitations when it comes to caring for a loved one and they supported having professional care as a viable option. Nine of ten said hiring professional help would be valuable to them if they ended up needing to provide long-term care for either a spouse (92%) and/or a parent (91%).

Start planning sooner rather than later

Most advisors agree that people wait too long before discussing their long-term care preferences and options. Wait too long and people risk having to make decisions quickly and under the duress of an immediate need. The actual age to begin planning for long-term care will vary by client and individual circumstance, but most advisors surveyed believed it to be around age 50. But a good rule of thumb is anytime you’re discussing retirement, it may be a good time to raise the subject with clients. Asking “What if?” questions is a great way to get the conversation started and encourages them to think ahead about what long-term care actually involves. Long-term care planning shares similarities with the many other client needs you address. An early start makes for more viable and better options, leading to more satisfied clients and referrals.


About Jeffrey Berson

40 years in and around the industry has made Insurance a part of my DNA. I have had the pleasure of working with and for some of the greatest minds in our industry. My "Bersonal" View is an attempt to capture some of the best ideas, the best concepts and the best practices in a way that can lead to success for others. It will certainly be my point of view, so please...don't take it "Bersonal".
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