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Long-Term Care Insurance

Andy Gryszowka, CFP®

Director of Financial Education

Last Updated
June 09, 2022
Smiling senior woman resting on a swiss ball at home

Is It Right for You?

There is often debate among financial professionals about whether long-term care insurance (LTCI) is worth the expense. Some advisors argue having long-term care coverage in place is vital to protecting clients’ assets in retirement. Others believe it’s more cost effective to invest the money a client would have used on premiums into a diversified portfolio that can continue growing over time to cover future care expenses.

At Creative Planning, we believe the correct answer to the question, “Do I need long-term care insurance?” is the same as the answer to many other financial questions: “It depends.” When determining whether long-term care insurance is right for you, consider the following.

What are your goals?

Do you hope to leave a financial legacy for your children or grandchildren after you pass away?

    • If yes, a LTCI policy may help protect the assets in your estate.
    • If no, your current assets may be enough to cover the cost of long-term care.

Do you hope to continue living in your home for the rest of your life, or do you wish to move to a senior living community?

    • If you want to continue living in your own home, you may need LTCI to cover the cost of an in-home caregiver.
    • If you plan to move to a senior living facility, the assets from the sale of your home may be enough to cover your housing and care expenses.

Do you have children or other family members who would take care of you should you become unable to take care of yourself, or would you prefer having a professional help with your daily living tasks?

    • If family members would take care of you, you may not need a long-term care policy.
    • If you would prefer to hire healthcare professionals, you may need LTCI.

What is your current financial situation?

Perhaps this question should be, “Do you have enough assets to cover the cost of long-term care without a policy in place?”

Healthcare is one of the largest expenses faced by Americans in retirement. A recent study by Fidelity estimated the average retired couple, aged 65, in 2021 would need approximately $300,000 in after-tax savings to cover healthcare expenses in retirement.1 And, according to the U.S. Department of Health and Human Services, 70% of adults who reach age 65 will require some type of long-term care as they grow older.2

If you have enough available savings to use for long-term care expenses without derailing your other financial goals, a LTCI policy may not be necessary. On the other hand, if you or your loved ones would struggle to pay such a large expense, it might make sense to invest in LTCI.

How old are you?

One of the most important considerations in determining whether or not LTCI makes sense is the age at which you purchase it. If you wait too long to implement coverage, you may not qualify. On the flipside, if you implement a policy too early, you may end up making premium payments for longer than necessary.

At Creative planning, we help clients prepare for long-term care and other medical expenses in retirement. Our diverse team of in-house professionals helps ensure your savings, investments and insurance strategies are working together to achieve your goals and protect your family from unnecessary risk. If you’d like help determining whether LTCI makes sense for your particular situation, or help with any other financial matter, schedule a call with a member of our team.

Footnotes:

  1. https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs
  2. https://aspe.hhs.gov/basic-report/what-lifetime-risk-needing-and-receiving-long-term-services-and-supports
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This commentary is provided for general information purposes only and should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.

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