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Retirement Dilemma: Dealing with Long-Term Care Costs

L. Ronald Blair, CFP®, CPCU, AAMS, RFC

As our last article discussed, potential retirees and current retirees are increasingly concerned about the cost of long-term care and dealing with the cost.

Recall that we discussed three options:

Option One:  To not worry about the potential cost of long-term care or simply say, "It won't happen to me." 

But remember, facts show nearly one of two seniors will need some form of care before death.

Option Two:   Divest one's assets and trust federal and state assistance under Medicaid programs.

Although our clients are not willing to do so before the actual event occurs, option two is a possibility. Increasingly, when we suggest this as an option in the early stages of retirement, no one seems interested. But, when potential long-term care is clearly evident, more folks are interested in how Medicaid would work.

A few thoughts about Medicaid planning might be appropriate:

  • A personal residence is an exempt asset when applying for Medicaid. Some states apply  a value of $525,000 to the maximum that would be exempt and still be eligible for  assistance.
  • In many states a married couple can hold one-half of their other assets up to approximately $113,000 and still be eligible for Medicaid (some states don't apply the "one-half" and just use $113.00).
  • There are other exemptions and caveats which are best to discuss with an attorney who specializes in  elder care.

Option Three:  Insure to protect when long-term care is needed.

Many of our clients are reluctant to do so because of the monthly cost and because of the possibility of not needing the coverage after paying premiums for extended periods.

We'd suggest an insurance possibility for the following reasons:

  • A few insurers' premium is a lump sum payment up front. The insurer requires a life insurance policy. If the insured requires some form of care, the policy pays a monthly benefit of a certain percentage of the face value of the policy for that care.
  • If the insured doesn't want to continue protection, the contract allows the individual to have his or her lump sum returned; and after a few years, interest is added to the lump sum.
  • Therefore, if long-term care is needed, the plan pays towards that cost. If the insured dies, the contract pays as life insurance. If the individual quits the plan, the premium is returned with interest in later years.

Option three seems to cover most objections our clients have to acquiring long-term care protection.

Please note that individual situations can vary. Therefore, the information presented here should only be relied upon when coordinated with individual professional advice.

Posted:  11/12/2012

About the Author

L. Ronald Blair is a Certified Financial Planner, Chartered Property Casualty Underwriter, Accredited Asset Management Specialist, Certified Senior Advisor, Registered Financial Consultant and owner of Personal Benefit Financial located at 870 Kipling St #A Lakewood, CO 80215 - Tel: 303-238-5123.  He is also a registered representative with Royal Alliance Associates Inc., member FINRA/SIPC.

Sharla Rountree, CFP® and L. Ron Blair, CFP®, AAMS,offer Securities and Advisory Services through Royal Alliance Associates, Inc., Member FINRA/SIPC . In this regard, this communication is strictly intended for individuals residing in the states of AK, AR, AZ, CA, CO, CT, FL, GA, HI, IA, ID, IL, IN, KS, MD, MN, MO, NC, NH, NM, NV, NY, OH, OK, OR, PA, SD, TX, UT, VA, VT, WA, WY. No offers may be made or accepted from any resident outside the specific state(s) referenced.