Thinking about aging can be challenging. The existential significance of the aging process is daunting. Then, on top of that, there is the question of the financial implications. For most people, this is enough to shelve any conversation on the subject.
From a Mindful Finance perspective, the feelings that keep us from engaging the topic of aging are real, valid, and meaningful. However, the habitual avoidance of engagement in reflection and inquiry around aging should not be fed. As we all know, avoiding thoughts about aging does not impede the aging process.
It is somewhat beyond the scope of Mindful Finance to directly address the existential aspects of aging. The financial considerations are a different story. These fit beautifully into the aware, non-judgmental container of mindfulness. We encourage the intentional creation of a safe, gentle environment to begin to look at how to plan for the natural process of aging.
In addition to estate planning, investing, life insurance and other topics, long-term care insurance is an important financial tool to consider with regard to aging. This is a rapidly evolving industry and the policies available today look very little like the policies in former years. The main take-away here is that if you haven’t evaluated your need and ability to acquire long term care insurance in the past year, we would encourage you to do so.
Why Does LTCI Exist?
The simple concept behind this type of insurance is to provide money for a person’s needs later in life when their ability to care for themselves has decreased. Let’s look at a few statistics that are helpful to understand why there is LTCI:
- 70% of people turning age 65 can expect to use some form of long-term care. (Source: LongTermCare.gov)
- The national median daily rate in 2014 for a private room in a nursing home was $240 (about $90,000/year). This has surely increased since that time. (Source: Genworth 2014 Cost of Care Survey, March 2014)
- Women need care longer (3.7 years) than men (2.2 years). (Source: LongTermCare.gov)
- 20% of today’s 65 year olds will need care for longer than 5 years. (Source: LongTermCare.gov)
- Medicare does not pay for long-term care, except in special cases, in a limited amount, and for a limited time.
- Medicaid does pay for long-term care, but only if you qualify. There are many rules around qualification, but it is simplest to think of the requirement as having no assets and insufficient income for your basic needs. The current Medicaid debate also is calling into question the reliability of Medicaid. The New York Times recently ran an article on this subject.
To summarize: many people will need long-term care, it can be an expensive and persistent need, and the social safety net is insufficient to rely on. For these reasons LCTI policies were created.
LTCI Product Evolution
The types of LTCI policies available have changed significantly over the years. The primary deterrents to purchasing LTCI policies have been removed. In the past, LTCI was usually rejected for one of the following reasons:
- The annual premiums were regularly increased over time, making the ability to keep the policy unpredictable.
- If you didn’t ever need the coverage all the money was “lost”.
- It was difficult to insure two people with one policy.
- The coverage wasn’t comprehensive enough.
Insurers became aware of these issues and now offer policies that address all of these issues. One of the most popular policies we use with clients offers:
- Lump sum or guaranteed premiums.
- Life insurance death benefit in the event that the long-term care benefits are not used, or the amount used is less than the death benefit.
- One policy covers two people. The two people do not have to be married.
- With the addition of a rider, the benefit payout amount is unlimited. The coverage is comprehensive and can be used at home, or in a facility.
Aging and the prospect of aging can be fraught with stress and worry. Financial matters are one of the causes for this suffering. Consider taking a Mindful Finance approach by engaging the subject of long-term care in a safe, nurturing situation to begin to work with the financial aspects of this natural process.
The essential idea in Mindful Finance is to work with our habitual patterns around money matters in order to improve our lives. First we notice our habits. Then we acknowledge that our habits were developed for some reason. Then we can evaluate whether those habits are still serving us, or if we should work to evolve them.
Planning for aging is an area that often can benefit from taking a Mindful Finance approach in order to learn more and break new ground in our financial lives.
Sol is president of Highlander Financial. He has over 20 years of experience in financial markets and managing businesses.