In Part 1 of this blog, I explained about the impending health and financial crisis described by my colleague, Robert Cochran, in his book Pills and Bills: How to Lose it All and End Up In a Nursing Home.
90% of Americans have not set up a solid plan for long-term care (LTC). And they may be putting off the decison for a number of popular excuses. Today we'll dive into a few other reasons we've heard from people about why they haven’t signed up for LTC yet. They might sound all too familiar.
- "It’s too expensive. I can’t afford it." This is about the smartest excuse yet, because it stops people dead in their tracks. What is so brilliant about this is that it allows people to appear concerned about long-term care without having to actually take any responsibility for it. "If I could afford to buy the insurance to protect myself, I would. But I can’t, so there’s nothing I can do about it." Now, I am not talking about people who might actually need to use Medicaid for these needs anyway. But for the rest of us, you might want to consider answering such questions as: “If I can’t pay for insurance — which only costs a fraction of the actual cost of receiving care — how in the world am I going to pay for the care itself?” Or, “If I really can afford to buy the insurance, but I just don’t want to spend the money, how will I feel about having to spend more money in one month to pay for my care than I would have spent in an entire year for the insurance?” Plus, “What if this continues year after year for many years? How will I be able to afford that?”
- "I’m going to do something, just not right now." Of course you are. You have every intention of addressing this issue and you’ll get around to it one day. There is no hurry... why rush? Here's why: the LTC market is rapidly changing. Costs are going up, coverage options are going down, and it’s getting much harder to qualify. Additionally, LTC is one of those things that is much cheaper the younger you are when you purchase it. Even if you factor in the extra years you have to pay, you still save by purchasing younger. And then you have the coverage in place, if you are one of the 40% of people who have a terrible accident or debilitating illness earlier in life. Generally speaking, the best time to LTC is between the age of 45 and 55. With all the changes happening, now is the time! Benefits that you can get now will not be around in the near future, especially for women!
- "I’m going to self-insure." If you're going to use this excuse, just make sure you do the math and are prepared to actually part with the assets you set aside for this purpose. Cost-wise, in current dollars, you're looking at approximately $5,000 to $6,000 per month at the low end, and $8,000 to $10,000 per month at the high end. Ask yourself this: Could your retirement income plan sustain such a hit? Even if you have the assets to self-insure, there are compelling reasons to purchase some kind of insurance product to cover this risk... which is why both Warren Buffet and Bill Gates have purchased LTC. Some good reasons to insure can be:
— Leveraging your assets: LTC costs pennies on the dollar for what it pays.
— Maintining control: Has anyone ever run into a situation where greedy heirs became stingy with the assets they were scheduled to receive one day?
— Allowing tremendous peace of mind: If you have established a plan, and have given your kids permission to hire assistance, then you can truly enjoy your retirement assets without having to set aside sizable assets for this purpose.
- "If I never need it, then I WASTED MY MONEY." I saved the best for last. This one has caught on like wildfire and is single-handedly responsible for untold numbers of people losing it all and ending up in a nursing home. In order to illustrate my point, let’s look at a few other examples of this kind of thinking:
— If a bank employs a security guard for 20 years and never has a robbery, did the bank waste its money all those years?
— If a woman carries mace in her purse but never has to use it, did she receive any value by having it?
— Do you judge the value of your home alarm system by how many times you have been burglarized?
My point is this: isn’t a big part of the value in these things that they prevent an undesirable event from occurring? And isn’t another big part of the value the peace of mind and protection they afford?
I realize I've shared this information in a... let’s say, “bold" fashion. I hope to spur you to take the first step and learn about your options to create a plan for paying for your future long-term care expenses.