By: Andrew Rosen, CFP®, CEP®

As our retiree clients start to age, one question is always on their mind, healthcare! They are concerned about costs, exposure, and need. When discussing retiree healthcare concerns with our clients, there is one area that always comes up, Long Term Care needs. This becomes a concern for many as this exposure isn’t covered under health and Medicare insurances. Because of this insurance gap it leaves retirees unprotected from what could be costly financially and emotionally.

What is Long Term Care:

That said let’s take a deeper dive into the esoteric world of long term care. Figured what better spot to start than a brief explanation. According to, LTC is a range of services and supports you may need to meet your personal care needs. “Most long-term care is not medical care, but rather help with the basic personal tasks of everyday life, sometimes called Activities of Daily Living (ADLs).” There are generally six ADLs that are referred to in determining ones need for long term care assistance. They are:

1. Eating

2. Dressing

3. Transferring

4. Bathing

5. Using a toilet

6. Caring for incontinence

These will be important as we discuss the potential need for long term care insurance.

Probability of needing LTC:

What is the threat of you actually needing long term care? This is the natural question we must answer as we determine our exposure. With the increasing advancements of medicine the statistics are quite staggering. The lifetime chance of needing some assistance if you are age 65 is 79% if you are a female, and 58% chance if you are a male! Scary right? Even scarier if you are a female since men have a higher probability of passing away of something sudden like a heart attack. I can tell you of my 4 grandparents all of them needed long term care needs in their lifetime. Naturally the longer you live the higher the probability you’ll need this care.

So how long should you plan for care? Let’s take a look at some more figures shall we.

According to Long-term care over an uncertain future; what can current retirees expect? A study from Peter Kemper, Harriett L. Komisar, and Lisa Alecxih 05-06 the following holds true.

Women: 21% won’t need care at all, 16% will need it for less than a year, 13% need it for 1-2 years, 22% 2-5 years, and 28% will need this care for greater than 5 years!

Men: 42% (double) won’t need it at all, while 19% will need for less than a year, 10% need it for 1-2years, 17% 2-5 years, and 11% will be receiving care for greater than 5 years.

This is a longwinded way of saying if long term care isn’t on your mind yet it better start being.

What are the potential costs of LTC:

To help you further analyze the risk exposure it would be helpful to get a sense of the costs. To understand costs we must first discuss the three types of care.

  1. In home care– The need for someone to come into ones house and care for you there. This is the most common and sought after form of care as our desires are to be disrupted as little as possible. Additionally, it is most comfortable to receive care in the confines of ones home.
  2. Assisted living– Is a facility that has nurses and aides available to help you on a daily basis with the activities of daily living you may need. This is the natural progression from home health care. These are more hands on facilities with a better array of resources for those that need more hands on care.
  3. Nursing home– We all want to avoid them as much as possible, yet that is not always a possibility. When we need more monitoring and round the clock attention we end up in a full on nursing facility.

The monthly costs will vary depending on where you live in the country. As you would expect New York City’s cost are more expensive than Montana’s. That said the National monthly average is $4,004/mo for home health care and $4,000/mo for assisted living facility. A nursing home goes up to a whopping $7,441/mo! To check your local areas average costs you can access Genworth’s nifty calculator.

Your options:

Now that you’ve calculated your own appetite for risk let’s take a look at your options for handling this potential need. I always tell people there are five options that I am aware of. They are as follows:

  1. Roll the dice– If you have better luck in Atlantic City than me this may be the best course of action for you. This is the lack of a plan, but some of us are OK with that. Hope that you’ll fall into the percentage of people that won’t need care. This is often when clients tell me they’ve instructed their kids to take them out back and shoot them. Good thing I’ve yet to see one comply!
  2. Put the onus on someone else– This is a very common approach. It entails informing your children (assuming you have them) that they should buy their next house with an in-law suite. These people plan to have their children care for them as they once raised their children. Fair request I suppose, my only concern is their ability to give you the attention you may need as they may be raising their own children at the same time.
  3. The government– I guess I was shaking writing this one as much as you are reading it. Basically the government will cover you for this care if you qualify. This sounds like a great plan until you realize what you have to do to qualify. To receive long term care from the government you must be on Medicaid. To get onto Medicaid you must hand over essentially all your assets to the government. Not fun I know.
  4. Self-insure– This is also a common means to protect oneself against the potential need. If you’ve planned and saved for this potential exposure in advance this is can be a good option. Essentially you’ll deal with the costs if/when they present themselves. At which point you’ll take on the entire costs out of your investments and assets. If you go this route make sure you plan for inflation and the potential need for both spouses to utilize care.
  5. Purchase Long Term Care insurance– The final way to cover this exposure is acquiring long term care insurance. This is an insurance that will give you a future bucket of money to your specifications to cover some or all of the future need. This can be a blog all unto itself so for today I’ll mention two things. One to qualify for care you need to be unable to do 2 out of the 6 ADLs. Second although you might not need this care until you are in your 70s or 80s I recommend acquiring in your 50s. The costs will sky rocket otherwise and you’ll be left without this as an option.

What are you going to do?

Long term care is not a fun thing to think or talk about. Sadly as you can see it is an inevitability for most of us, especially if we are married and live into our mid-60s. I suggest working with your financial planner to help determine your appetite for risk. From there you can discuss what combination of options works best for your unique circumstances.

Whichever option or options you choose make sure you plan in advance otherwise the planning will be done for you.

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Andrew Rosen

In his role as Financial Planner, Andrew forges lifelong relationships with clients.  He coaches them through all stages of life and guides them to better achieve their life goals.  For more information about Andrew or the other firm partners, Kyle Hill and David Levy, click the link below.

Find out more about Andrew Rosen, CFP®, CEP®
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Financial planning and Investment advisory services offered through Diversified, LLC, a registered investment advisor. Securities offered through Securities Service Network, LLC, Member FINRASIPC .  Associates of Diversified are registered representatives of Securities Service Network, LLC, a registered broker/dealer, 9729 Cogdill Road, Knoxville, TN 37932. (800) 264-5499.