Can Your Nest Egg Be Cracked?
Boomers and their parents are searching for ways to preserve lifetime assets.
By Gail Lindsey

Suppose all of a sudden you or your spouse had to pay $100 a day for at-home care. Or even more grim, you find yourself paying $60,000 or more a year for nursing home care. Could you finance these costs out of your current nest egg? Whether you are employed or retired, both scenarios are real possibilities.

Being elderly and needing care is a definite problem in our society today, but long-term care (LTC) can happen at any time and at any age. Here are just a few facts to drive home the point.

• In the 40-65 age group, four out of ten people will develop cancer and more than half of the individuals at this age will have some need of a caregiver.

• Of those individuals receiving extended care services, 40% are between the ages of 18 and 64.

• For those individuals who reach age 50, there is a one in five chance of experiencing a severe disability before the age of 65.

• At age 65, the risk climbs to sixty percent and continues to rise with each decade of life.

Hopefully, you will be one of the few to defy these statistics and die in your sleep at the age of 90 after an exhaustive day of downhill skiing or a lazy beach day listening to the rolling surf. However, if you have worked hard to build a nest egg, you must insure against the risk of LTC and protect your assets. One of the best ways to do this is through LTC insurance. By leveraging today’s dollars for tomorrow’s expense, you can preserve your finances and retirement plans. Just as importantly, when the time comes to cash in on your LTC coverage, you will preserve the lifestyle and dignity reflective of who and what you have always been.

Let’s take a close look at the importance of having LTC insurance. Like most successful Americans, you’ve insured yourself against three of the four major emergencies that could severely affect your finances: fire (homeowners), hospitalization (major medical or Medicare), and automobile accidents (liability and collision). Protection against costs associated with LTC, the fourth major risk, must be as important to you as the other three.

No one wants to be a burden to family, either personally or financially. The LTC issue is complicated in terms of who serves as the primary caregiver as well as who finances the costs. LTC insurance pays for at-home care, assisted living facility or a nursing home facility. Today’s costs for a nursing home average $60,000 per year, with cost projections at more than $240,000 per year, in the next 20 years. Current at-home costs of $60 to $300 or more per day will rise accordingly.

Today’s medical technology far exceeds anything we have known in past generations. Not only has the average age of Americans increased, but many people are also now surviving acute conditions, such as heart attacks. However, as America ages, more chronic illnesses, such as Alzhiemers or Parkinson’s disease, have overtaken acute conditions as major health care concerns. Both longer life spans and chronic illnesses substantially increase the chances of needing some kind of caregiving during our life.

Now suppose the opening scenario happens to your parents instead of to you. One of them must suddenly pay for care at home or in a facility. Do they have LTC insurance, and, if so, is the coverage adequate? If they don’t, who will pay for caregiving if their financial resources become exhausted? If indicators point your way, then your finances could be greatly impacted with a situation such as this. Many elderly, as well as their grown children, assume Medicare or Medicaid will assist with LTC. Although Medicare is the primary health care system for those 65 and older, it only pays for limited skilled and/or rehabilitative care. Medicare does not cover custodial services in a nursing home or elsewhere and Medicaid requires that you impoverish yourself to receive assistance. In doing this, you relinquish all choices about your care. The state determines where you receive care, the level of care, the quality of care, and the person with whom you will live. This is not a situation in which we want to see our parents or ourselves spend the later years.

Federal and a growing number of state tax codes allow individuals to have tax breaks for purchasing LTC insurance. For those who are self-employed or business owners, there are even greater tax advantages. Approved by Congress in 2003, there is also a new tax-preferred program called a Health Savings Accounts (HSA) that allows you to pay for health-related costs, including LTC insurance, with tax-free dollars.

No matter how old you are, the best time to purchase LTC insurance is now. Rates are fixed by your age at the time of your application. If you purchase the policy at a younger age, you will pay for a longer period of time, but your total cost will be less in the long run. Additionally, if you obtain coverage at a young age, chronic health conditions may not have surfaced, and you will probably qualify for preferred rates.

Don’t let an unexpected turn crack your nest egg. Of the four major risks—home, health, auto, and LTC—LTC is the greatest risk and one of the most devastating to families and loved ones. LTC insurance can help you preserve your financial independence, as well as enable you to leave a legacy to your children and grandchildren.

Gail Lindsey is the founder of Lindsey & Associates, specializing in Long Term Health Care Insurance in Chattanooga, Tennessee.