Protecting Your Income and Assets
If you don't have $3,000-$9,000 a month income to spend on long term care cash in your assets.
The average time an individual spends in care breaks down to about 95% in home and community based care and 5% in nursing home care. The reasons for this are that people are living longer and they want to stay in their home.
Home health care can cost from $100-$400+ per day depending on the care needed. Most home care is non-medical "personal care and homemaker services" including things like: bathing assistance, meal preparation, shopping, laundry, homemaking, and other incidental services.
Home care can also include "home health care" provided by nurses, physical, occupational, respiratory or speech therapists, audiologists, etc.
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Community based care, independent living and assisted living, can cost $100-$200+ per day. The line between senior housing and assisted living is blurring. Some people prefer living in a community rather than living alone at home. Often meals and social activities are included.
Adult day care which can be medical or non-medical is provided on less than a 24-hour basis in adult day care facilities. Some people with a mild stroke, dementia or Alzheimer's may spend the day at such a facility while the spouse is homemaking or working. (Alzheimer's Early Warning Signs)
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The annual cost of nursing home care typically ranged from $42,000 to $190,000 and the average length of stay in a nursing home is 2.5 years. Since the median net worth of households headed by those of retirement age is about $83,000, it is clear that just two years in a nursing home could result in poverty for many who fail to plan for it effectively.
It is both your income and assets before and after retirement that will be at risk if you need long term care. Long-term care insurance provides access to quality care and income/asset protection.
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Long Term Care Expenses Effects on Income/Assets
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| . | Assets Start | Income Needs | LTC Expenses | Investment Yield | Assets at End of Year |
| Year 1 | $500,000 | $50,000 | $45,000 | $37,559 | $425,206 |
| Year 2 | $425,206 | $51,500 | $47,250 | $31,589 | $358,045 |
| Year 3 | $358,045 | $53,045 | $49,613 | $25,869 | $285,256 |
| Year 4 | $285,256 | $54,636 | $52,093 | $12,342 | $193,869 |
| Year 5 | $193,869 | $56,275 | $54,698 | $11,828 | $91,989 |
| Year 6 | $91,989 | $57,964 | $57,433 | $3,266 | Depleted |
Some people think they will save money by waiting, but it will never be cheaper than today, especially if you have a change in health. The cost of waiting can be devastating to your income if you cannot qualify. (cost of waiting)
Today, comprehensive long term care insurance is what is most commonly available, which means that all forms of care; home care, assisted living, and nursing home are covered by the insurance.
| If you have assets you should consider having a will, a living trust, health care directive (living will), and long term care insurance. |
What Risks Are You Facing Every Day?
- 1. Home: Homeowners have insurance to protect their savings from the risk of a house fire, flood, or act of God. The chances of your house being destroyed is about 1:1200.
2. Auto: If you have a car it is likely you have insurance. The chances of your car being totaled is 5: 1,200. - 3. Health: If you have medical insurance then you are protecting yourself from the 105:1,200 chance of needing hospitalization (3 day/$40,000).
- 4. Long-term Care: The only other risk to your income/assets is long term care at 720:1,200. Even with odds as great as this few people are aware that they need to protect their income/assets with long term care insurance.
If you do not have long term care insurance today you are self-insured. (see self-insure chart)
Why would you treat long term care differently than the other risks you face?
The chart below shows the daily risks you face in relation to each other. 
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According to the National Insurance Institute long term care is the biggest risk to our income/assets and independence. The only thing protecting you now is your health, which could change at any time. Once your health changes, and it doesn't have to be debilitating, you may not qualify for insurance. And since it can happen at anytime doesn't it make sense to insure against the cost of long term care before you need it?
Would you rather spend $1,000-$6,000 a year for insurance or $3,000-$7,000 a month for care? Cost of insurance depends on benefits and age. |
Are you ready for the consequences that you and your family would face if you suddenly needed long term care?
On the previous page you saw how few assets and little income Medicaid will allow you to have while on Medicaid. But before you can receive Medicaid you must qualify and to qualify you must "spend down" your assets if they exceed allowable. The following story is an example of what can and has happened to families.
John and Mary Jones
John and Mary Jones are a typical household. They have a house that is worth $500,000. They have two cars, a fishing boat, and $200,000 in savings and CDs, they also both have 401K retirement accounts. In scenario one they do not have long term care insurance. John suffers a stroke that leaves him unable to work and requires long term care.
Without insurance they would be paying for John's care out of their savings. If John required skilled nursing care at $60,000 per year their savings would be exhausted after 3.3 years of care (at current rates) and it would leave Mary with no money for her care.
| After spending down their assets, selling the second car and the boat John could apply for Medicaid. To qualify for Medicaid they can keep one car, one house, and a few other non-cash assets (Medicaid list).
Once John was accepted for Medicaid a lien would be placed on their remaining assets (house) for future collection. If they had children, what could be passed on to the children is what is left after the lien(s) were satisfied. Medicaid also has a "look back" period where they look to see if any assets have been transferred to avoid paying for Medicaid care. Currently the "look back" period is 50 months (30 months in California) and either the federal or state governments can extend this at any time. Of course it would be a different story if they had long term care insurance protecting their assets.
If you were John and Mary which would you have chosen to self-insure or buy long term care insurance? |
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